Rising costs are making Indian labour less attractive

For years, India's outsourcing industry has dominated the discourse surrounding the country's economic boom.

Call centres filled with ranks of computers and low-cost English-speaking staff – often trained to mimic accents and show familiarity with local mores – were cast as emblems of sky-high growth; it didn't matter that hundreds of millions of Indians worked in other industries.

The low-cost factor was key, making it worthwhile for Western companies to farm out the business of answering customer queries to the suburban Indian townships that often housed these call centres.

But costs have been rising as wages go up and urban real estate becomes more pricey, with headline inflation across the economy running at about 9 per cent. Battling to rein in the pace of price rises and stave off the threat of overheating, central bankers have already raised key interest rates 10 times this year.

The growth in the IT industry has also unlocked more – and often better – jobs for young professionals, who have become adept at switching firms in the quest for higher salaries. Answering calls in the middle of the night from agitated mobile phone users on the other side of the world is not the best option; the nature of outsourcing has changed to encompass fields such as legal services.

All this has driven up staff turnover in Indian companies, so that in many call centres where the work is routine and script-based, the rate is running at "60, 80, sometimes 100 per cent," according to Ian Marriott at Gartner. These factors mean that Western companies are now looking at cost savings of "10 to 20 per cent", rather than the 30 to 40 per cent seen around 2002 and 2003.