The other side of the IT boom
Yesterday, I was watching one of those programmes which deals with "Great Infosys Story". Narayanmurthy in the programme said that if one were to point of the one single success of liberalization it was Infosys. I don't disagree with that, and I actually think that Infosys is a great Indian firm. But IT is neccesarily an island of excellence and high productivity. This high productivity has translated into high wages and high profitability of the firms. The profitability bit has in part contributed to the stock exchange story, but it is the wage bit that I will to deal with.
The IT boom in India has created a class of people who are young, with high disposable incomes and concentrated in a few urban areas like Bangalore, Delhi (Noida / Gurgaon), Chennai, Hyderabad and Bombay. In my mind, this boom has created some totally new urban dynamics which are best reflected in cities like Bangalore, Hyderabad and chennai.
The first change in urban dynamics has been the boom in rent rates in these metros. IT folks have gravitated to these cities since the jobs are here. Considering the highly constrained housing availability in metros in India, these guys with more money and fewer responsibilities/obligations, are willing to pay more than others for their houses. Our historic middle classes (government/PSU/bank employees and people working with manufacturing concerns) have been priced out of the prime housing markets. Just try finding a house in one of the "hip" Bangalore localities (Koramangala, National Games village and Cox town) with a manufacturing industry salary.
The second change has been in services getting more expensive. Again due to younger guys with more money to throw around, maids and domestic help market has seen a big demand surge. Consequently wages for these kinds of work has increased. I used to pay a lady 1000 rupees a month for something like 2-3 hours of work a day at my place. Although the domestic help market is not supply constrained, it does create some really unstable and undesirable equilibria (like taxi costs at tourist spots) in certain places.
The third key change is the sprouting up of expensive leisure zones in our cities. Our citie s are seeing the emergence of expensive watering holes, really expensive movie halls, really really expensive restaurants and so on.
The downside of these urban dynamics is that the traditional middle classes are hurt the most. There salaries have not kept pace with the IT sector but the costs of houses and services definitely have. This not only creates heart burn, but our cities develop a schizophrenic character - really swank rich zones and not so swank not so rich zones.
Another reason about why we need equitable growth across manufacturing and services.
The IT boom in India has created a class of people who are young, with high disposable incomes and concentrated in a few urban areas like Bangalore, Delhi (Noida / Gurgaon), Chennai, Hyderabad and Bombay. In my mind, this boom has created some totally new urban dynamics which are best reflected in cities like Bangalore, Hyderabad and chennai.
The first change in urban dynamics has been the boom in rent rates in these metros. IT folks have gravitated to these cities since the jobs are here. Considering the highly constrained housing availability in metros in India, these guys with more money and fewer responsibilities/obligations, are willing to pay more than others for their houses. Our historic middle classes (government/PSU/bank employees and people working with manufacturing concerns) have been priced out of the prime housing markets. Just try finding a house in one of the "hip" Bangalore localities (Koramangala, National Games village and Cox town) with a manufacturing industry salary.
The second change has been in services getting more expensive. Again due to younger guys with more money to throw around, maids and domestic help market has seen a big demand surge. Consequently wages for these kinds of work has increased. I used to pay a lady 1000 rupees a month for something like 2-3 hours of work a day at my place. Although the domestic help market is not supply constrained, it does create some really unstable and undesirable equilibria (like taxi costs at tourist spots) in certain places.
The third key change is the sprouting up of expensive leisure zones in our cities. Our citie s are seeing the emergence of expensive watering holes, really expensive movie halls, really really expensive restaurants and so on.
The downside of these urban dynamics is that the traditional middle classes are hurt the most. There salaries have not kept pace with the IT sector but the costs of houses and services definitely have. This not only creates heart burn, but our cities develop a schizophrenic character - really swank rich zones and not so swank not so rich zones.
Another reason about why we need equitable growth across manufacturing and services.
posted by Dinkar at 8:01 PM
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