India & Europe Win-Win Game
India & Europe
How to create a Win-Win
game in IT ?
IIT Delhi - 24 November 2008
Dr. Jean-Joseph BOILLOT
Economist India-China
Cofounder Euro-India Economic & Business Group
[email protected]
1
India & Europe Win-Win Game
Challenges ahead
Economic catch up: magnitude and lag
Population challenge: the Window of Opportunity
Global challenges: see climate change
The Services Revolution
Challenges for Europe
Challenges for India
2
India & Europe Win-Win Game
India and Europe 2025: still distant
Projection 2025 en Mds USD (current US $ and current relative prices base 2000)
PIB
China
US
India
India*
France Germany Japan Brazil Monde
2005
2 300
11 100
671
671
1 400
1 840
5 190
615 36 294
2025
8 287
19 287
1 890
2 772
1 833
2 692
7 113
605 60 902
PIB/hab
2005
1 748
37 222
608
608
22 951
22 169 40 563
3 366
5 614
2025
5 749
55 091
1 354
1 986
29 097
33 647 58 486
2 644
7 704
Population Mios
2005
1 316
298
1 103
1 103
61
83
128
187
6 465
2025
1 441
350
1 395
1 395
63
80
122
229
7 905
PIB % Monde
2005
6,3%
30,6%
1,8%
1,8%
3,9%
5,1%
14,3%
1,7%
100%
2025
13,6%
31,7%
3,1%
4,6%
3,0%
4,4%
11,7%
1,0%
100%
PIB/hab USA=100
2005
5%
100%
2%
2%
62%
60%
109%
9%
15%
2025
10%
100%
2%
4%
53%
61%
106%
5%
14%
Pop % Monde
2005
20%
5%
17%
17%
1%
1%
2%
3%
100%
2025
18%
4%
18%
18%
1%
1%
2%
3%
100%
Croiss. val/an
6,6
2,8
5,3
7,4
1,4
1,9
1,6
-0,1
* Scˇnario croissance en volume Goldman Sachs et valorisation CEPII
3
India & Europe Win-Win Game
… even more per capita
GDP per Capita in USD at current exchange rate USD
in 000
90
USA
80
Japan
70
EUR4
60
China
50
India
40
30
20
10
0
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
source: Goldman Sachs oct 2003
4
India & Europe Win-Win Game
How long the Demographic Window of opportunity?
:
INDIA: annual rate of growth total
and active population
CHINA: annual rate of growth total
and active population
3,5
3,0
3,0
Total Pop
2,5
old15-59
Total Pop
2,5
old 15-59
2,0
2,0
1,5
1,5
1,0
0,5
1,0
0,5
0,0
-0,5
0,0
-1,0
-0,5
1950-55 1960-65 1970-75 1980-85 1990-95 2000-05 2010-15 2020-25 2030-35 2040-45
-1,5
1950-55 1960-65 1970-75 1980-85 1990-95 2000-05 2010-15 2020-25 2030-35 2040-45
5
India & Europe Win-Win Game
The World Population 1950-2050 (billion)
Millio
ns
Europe
Eur Ouest
USA
China
Afrique
India
3
2
2
1
1
2050
2040
2030
2020
2010
2000
1990
1980
1970
1960
1950
0
6
India & Europe Win-Win Game
Same in percentage, Different picture!
Europe
Eur Ouest
USA
China
India
Afrique
25%
20%
15%
10%
5%
2050
2040
2030
2020
2010
2000
1990
1980
1970
1960
1950
0%
7
India & Europe Win-Win Game
Even more with the 15-24 years old group
USA
Europe
India
China
Afrique
400
350
300
250
200
150
100
50
2050
2040
2030
2020
2010
2000
1990
1980
1970
1960
1950
0
8
India & Europe Win-Win Game
The Earthquake on the global labor Market
5 years incremental variation of the age group 15-59 % total world
India
110
China
Europe
USA
Eur Ouest
Afrique
90
70
50
30
10
-10
-30
2045-50
2040-45
2035-40
2030-35
2025-30
2020-25
2015-20
2010-15
2005-10
2000-05
1995-00
1990-95
1985-90
1980-85
1975-80
1970-75
1965-70
1960-65
1955-60
1950-55
-50
9
India & Europe Win-Win Game
CO2: a good exemple of the sustainable challenge
10
India & Europe Win-Win Game
II-The Services Revolution and the standart Economic Theory
11
India & Europe Win-Win Game
The Services Revolution and the standart Economic Theory
12
India & Europe Win-Win Game
The Services Revolution and the New Economic Theory of
imperfect competition and localisation
1/ The ITC revolution allows an increasing number of
services to be produced at TIME and PLACE different from
the place of consumption.
2/ The production any services can be henceforth
distributed internationally according to the comparative
advantages of territories and of the competitive strategies of
firms.
3/ The economics of services gets more and more closer to
the standart « industrialisation model » and « imperfect
competition » : high specialisation, return to scale, cluster
and size benefits etc…
13
India & Europe Win-Win Game
Outsourcing: just a begining!
14
India & Europe Win-Win Game
Global Gains, yes, but what distribution?
Country advantage
(45-55% savings)
100
Vendor advantage
(30-40% savings)
60-65
10-15
Original
Cost
base
Factor
Cost
Savings
Additional
Telecom
& management costs
Task migration
8-13
Off-shore
Location
cost
5-7
ConsoliTask
ation,
Reengi
Standar- neering
Dization
& superior
skills
Does not
Include gains from
Over-delivery and
continuous
improvement
3-5
Economies of
scale
Process
Reengine
-ering
New cost
base
Task level
improvement
15
India & Europe Win-Win Game
High
(Low)
Embryonic
Growing
Mature
End of
cycle
IT
Offshoring
Call centers
Banking BPO
Maturity
(Value Add)
Accounting
HR
Contract
manufacturi
ng
R&D/Innovation
Knowledge
Processes
Low
(High)
Timing
How to reopen the pathway to India with a mixed strategy
And Europe swandich between the USA and India
16
India & Europe Win-Win Game
III- Dual challenge Europe and India
a/ for Europe
The Brain Drain between Knowledge Based Economies: the EU
Human Capital Outflows to the US (Ahmed Tritah survey, CEPII
2008)
1/ EU brain drain to US is about a small number of individuals, but
the share of Europeans who are leaving is increasing as one moves
along the educational distribution and ladder of occupations that
matter the most in the knowledge economy.
2/ Using productivity based brain drain indices it is found that
aggregate human capital conveyed by emigrants has increased
since the 1990s.
3/ Finally, as a proxy for the of human capital embodied in EU
emigrants, Europeans earn a positive wage premium relative to the
US natives and even higher for the most recent expatriates cohorts,
providing further evidence that the quality of European emigrants
17
has increased.
India & Europe Win-Win Game
a/ for Europe (2)
18
India & Europe Win-Win Game
b/ for INDIA
19
India & Europe Win-Win Game
Understanding better the EU New Economic Geography
in our Globalized World
20