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Business

India now outsourcing to Mexico. Culprit: The Rupee Vs. The Dollar.

By: Karthik :+: Under: Business
On: ⋅ June 8, 2007 ⋅  Email this post ⋅  Print this post ⋅ Post a comment
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Rupees and Dollars.

It is always weird to report about jobs being outsourced from India to others parts of the world. The kicker here is that these are IT jobs and the company doing the outsourcing is TCS (Tata Consultancy Services) one of India’s leading software companies.

The reason, strengthening of the rupee. For the people who have never had to exchange money this is how it works. All major countries peg their currency to the Dollar. Based on various factors the value of your currency goes up / down in the world marker. Consider this, a relative exchanged about 3.28 Lakh rupees for US$8,000 in the past week. When I traveled to India a few years ago, for a thousand dollars less (US$7,000), I would have had the same 3.28 lakh rupees.

Bottom line, today a rupee costs more than it did a few years ago, as in the rupee is gaining strength. When you look at the millions of dollars corporations are investing, a major change like this will send their budget department burning the midnight oil for the next few months. This also brings other more “expensive” countries as a viable option.

The rupee gained 9.2 per cent against the dollar this year, eroding Tata Consultancy’s earnings from the US, its biggest market, and increasing Indian costs relative to other nations.

Salaries in Mexico are about 30 per cent higher than in India, he said. Having software programmers in Mexico allows Tata Consultancy to serve US customers more quickly because they work in the same time zone, making travel to clients for support less time-consuming, he said.

I always felt that the lack of qualified professionals (yes we have a billion people, but given the demand we will be running out of them soon) in India will eventually result in another country taking over the top position in outsourcing. I just did not think that the currency valuation would pay a part, at least not so fast.

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