India’s Skill Gap in ITES Sector: Can RURAL BPO be the Answer?

The Metros and Tier-I cities in India have reached the breaking point. Some of these mega cities are almost on the verge of collapse as they fail to meet the growing demands of the ever increasing population in urban India. According to census findings, for the first time since 1921, urban India added more numbers to its population in a decade than rural India did. India's rural population today is 90.6 million higher than it was a decade ago. But the urban population is 91 million higher than it was in 2001. Is urban India ready to cope with this explosive growth? Unfortunately, the cities in India are crying for better infrastructure, better roads, better sanitation, better amenities which seems to be an elusive dream.

Paradoxically while urban infrastructure is crumbling, the cost of doing business in Indian metros is also on the rise. Unconfirmed sources suggest that the real estate of Bangalore is more expensive than that of Huston in the USA. Renting commercial space in some Indian metros costs more than doing the same in several cities in the USA or Europe. This is not all. Growing inflation rate is virtually making everything expensive in Indian cities including commercial space. This problem is further compounded by lack of skilled manpower. The availability of employable resources is a challenge in cities because most companies compete for the same resource pool. When we look at the statistics, they speak volumes of the skill-gap in the country. According to a research conducted by NASSCOM, every year more than 3 million graduates and post-graduates are added to the Indian human resource pool and out of these only 25% of IT graduates are considered employable by the IT/ITES industry.


While cities are grappling with the aforesaid challenges, we can see things beginning to change for the better in rural India. Today, over fifty percent of India’s FMCG market is in rural India. The Banking Industry is going to see 5 crore new bank accounts new their rural branches. Through Gramin Rojgar Yojna, Government is going to reach to 4o million households in rural India. Massive computerization is happening in villages. Under the RTI act, people can raise complaints on-line from their villages. Under the Right to Education Act, Indira Gandhi National Open University is going to reach out to millions of young people in villages to provide higher education to them. It is estimated that by 2020 rural India will be 500 billion dollar market.

So there is huge potential emerging in the rural India. While cities will continue to be the centers of economic and financial activities, we shall also see a big transformation of rural India. Now the mute question is: when this paradigm shift is taking place, will India’s BPO/ITES industry join the band wagon or not? Or will it miss the bus? So far RURAL BPO has been more of a CSR initiative by a few organizations. Will these and other companies now look at Rural BPO as a serious business proposition? To find answers to these questions, let’s understand what advantages Rural BPO has to offer to organizations and investors:


Companies can easily expect 50-60% savings in their operating expenses in rural areas. This itself is a huge advantage. They have to pay much lesser salaries to their employees in their rural BPO centers. They don’t have to build and maintain fancy offices like they do in cities. They need not provide services like transport, cafeteria etc. to their employees and thereby reduce their overhead costs. Moreover, they can have a lean operation with minimal support staff.


This can be a huge boon for Corporates. It is a big thing for youths in villages to work for a reputed organization with a brand name. If opportunities are available to them in their own village, they are more likely stay in the organization for a longer period. Moreover, there are not enough opportunities available for them for job-hopping. So employee retention will be much higher in rural BPO.


Owing to the spread of education in small towns and villages through various Government and Private sector initiatives, there is a huge pool of educated youths available in these areas. Many of these youths (especially women) do not migrate to cities for employment. According to some studies only 15-20% of the workforce from small towns and villages migrate to cities for jobs. The rest especially women stay in their towns or villages taking whatever jobs are available. Rural BPO centers will have access to this the talent pool.


This advantage is more for the nation and the common people rather than for the corporate organizations. Growth and prosperity should not and must not be confined to urban India. Growth should be inclusive and inclusive growth can be achieved through de-centralization. Rural BPO along with other initiatives (by Government and non-government agencies) can ensure better employment opportunities and better living standards for the people in villages.

We have looked at several advantages offered by rural BPO. However, in spite of having so many advantages, rural BPO has not made significant stride. I think it is primarily because of a few major road blocks. Lets look at some of these road-blocks below:


Many villages today lack the basic infrastructure in terms of roads, facilities, connectivity, high-speed internet etc. This comes as the biggest bottleneck. While Government is taking steps to ramp up infrastructure and improve living standards in rural India, still there is a glaring gap.

However, the corporate organizations need not lose hope or give up. They can carefully select villages which meet the minimum standards in terms of infrastructure. There are many villages in India which should meet or exceed the minimum standards. Corporates need to look for self-managed infrastructure as well. They should also look for partners like educational institutions, NGOs and other agencies with whom they can collaborate to build and maintain infrastructure.


While I have cited easy availability of manpower as a positive factor for Rural BPO, this is only half the truth. The other aspect of the truth (what can really spoil the party) is that many from this available manpower are not ready to hire. They lack employable skills. Though many of them possess graduation or post-graduation degrees, they do not possess skills that matter- English communication, customer service etc.
To deal with this problem, corporate organizations need to join hands with local colleges / universities to provide industry ready training as part of the curriculum. They can also partner with training institutes to provide training. Training should include: soft skills training including English communication, customer care, telephone handling skills, e-mail writing etc. Many organizations and training institutions are shying away from training rural youth terming them as non-trainable. I am reminded of a famous quote by Richard Bandler: “There are no such things as learning disabilities, there are only teaching disabilities.” This is a powerful statement. In my experience with rural BPO, I have seen that the youths in rural India are equally capable and passionate to learn and succeed like their counterparts in urban India. The only thing they lack is exposure to industry and corporate culture.
Madhya Pradesh has been a pioneer in skill development initiatives. This is currently a happening state with a lot of potential and it is doing a lot in the area of skill development. The state has demonstrated that it has learnt from the mistakes other metros have made in their development journey and it is trying not to repeat the same.


Another big challenge is for organizations to scale up their BPO operations in rural areas. Unlike cities, organizations can't have a single BPO center with 5,000 or 8,000 people. A center could have only anywhere between 50 to 300 people. The rural BPO model is scalable only if it's distributed — with 5 or 6 centers reporting into a hub. This is called the hub and spoke model. With technology like video conferencing and connectivity getting better implementing a hub and spoke model is going to be easier than ever before.

De-centralization and Inclusive Growth is the need of the hour today. And it is not only the job of the government, but all of us have to play our role in it. Only on economic terms probably rural areas cannot compete with urban areas. However, looking at the other incentives (emotional, close to their roots, family, culture, society) many people, if they get a decent employment would not choose to migrate to cities. If our resources- both natural and human are utilized properly, they would make a huge difference. But unfortunately, a very large proportion of our young population in our country is un-employable. Our Education system focuses on skills which were designed for the industrial era; and do not fulfill demands of today. In my opinion, everyone- Government, corporates, NGOs, agencies (like NASSCOM, NSDC) and individuals have to play their role with full dedication and passion for the inclusive growth of the country.

Surya Prakash Mohapatra
India Head- KM and Training
Hewlett Packard Global Business Services

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