India’s IT industry outpaced by business process outsourcing

IN a boost for India's economy, business process outsourcing (BPO), which involves companies handing over routine tasks like customer service or back-office operations to specialised providers, exports are growing faster than traditional IT services.

According to a report by Kotak Institutional Equities, this trend is expected to continue into 2026, driven by global firms seeking cheaper ways to operate sustainably amid economic pressures.

For South African and African readers unfamiliar with BPO, it is essentially the “behind-the-scenes” work that keeps businesses running smoothly, often from offshore locations. And India’s success here offers a blueprint: By training a large, English-speaking workforce, it turned BPO into a job engine. Africa, with its 1.2 million current BPO workers and potential for 1.5 million more jobs by 2030, could learn from this to create similar opportunities in hubs like Johannesburg or Harare.

As fellow BRICS+ nations sharing a history of colonisation, poverty and inequality, India, once poorer than many African countries just a few decades ago, continues to outpace Africa in education, innovation, and economic transformation. This makes India not just a reference point but a practical model for unlocking our youth’s potential in the Fourth Industrial Revolution (4IR). Under Prime Minister Narendra Modi’s leadership, India has channelled its national focus on education and innovation, turning a young, skilled workforce into a global powerhouse.

As South Africa and Africa grapple with persistent youth unemployment and a skills gap that threatens our economic future, India's remarkable strides in BPI, IT and AI readiness offer a compelling model for transformation.

This is evident in the booming BPO sector, where Indian exports have reached $45 billion, capturing 20% of global outsourced spending and growing at a robust 7.8% compound annual growth rate, outpacing both global averages and India’s own IT services.

With the global BPO market projected to expand to $268bn by 2029, India’s success underscores how strategic investments in skills can drive economic growth, even amid challenges like inequality and unemployment.

For African policymakers, this story is not just inspirational; it’s a practical guideline for harnessing the 4IR to create jobs and foster self-reliance.

India’s journey, as a fellow BRICS nation facing similar socio-economic hurdles as all the African Union (AU) member states, demonstrates that inequality need not hinder progress. Prime Minister Narendra Modi’s government has made education and innovation policy priorities, overhauling technical institutions like the Indian Institutes of Technology and launching initiatives such as the “FutureSkills Prime” platform to reskill over 50% of the professional workforce annually.

This has positioned India to produce over 1 million youth AI professionals by 2026, supported by startup incubators in sectors like healthcare, agriculture, and climate tech, as well as reserving 40% of seats in tech programmes for rural and disadvantaged students.

India’s AI Marketplace is set to also add $500bn to its GDP by 2030, while a $10bn Semiconductor Mission promotes self-reliance in chip design. These efforts have attracted global giants such as Microsoft, Google, Amazon, and Meta, who have hired more than 15 000 Indian AI specialists in recent years, with Microsoft alone investing $3bn, while companies like Apple and Tesla are shifting their Gigafactories to India, drawn by a ready pool of IT-skilled, cost-competitive labour.

In contrast, investors increasingly overlook South Africa, in particular, due to high labour costs, an unskilled workforce, and bureaucratic red tape. High labour costs are compounded by restrictive regulations and the frequent intrusion of labour unions into private company management, creating uncertainty and hindering operational flexibility.

This bureaucratic red tape, alongside a critical skills shortage, deters the foreign investment needed for growth. To reverse this, South Africa must streamline processes and reskill its workforce to fully deploy service industries like BPO, often rebranded as Global Business Services (GBS), to avoid the negative connotations of “outsourcing”.

This would position the continent’s youth as a cost-effective, agile labour force tailored to meet global demands.

This hard truth underscores a fundamental shift in global power dynamics: in a borderless digital economy, capital is mobile, but labour often is not. Investors, seeking the highest return for the lowest risk, now operate with a global menu of options.

They are no longer tied to a single country or workforce. If met with inflexible demands, prohibitive costs, or operational hostility in one nation, they can and will simply allocate their capital to a more welcoming environment, be it India, Lesotho, Brazil, or the Philippines.

Consequently, while the right to fair negotiation is sacrosanct, the leverage of any local workforce is ultimately checked by this global reality. We simply do not have the luxury to dictate terms that ignore this competitive pressure, as the ultimate consequence is not a negotiated compromise, but a complete loss of investment, jobs, and opportunity to a more agile competitor elsewhere.

Therefore, with more than 12 million young Africans entering the job market annually, we can emulate India’s offshore appeal by training young people in customer support, data entry, and AI-related tasks.

Africa’s BPO sector already employs about 1.2 million people, with South Africa leading at over 270 000 jobs, many for international clients. Growing at 14% annually, nearly twice the global rate, this could add 1.5 million jobs by 2030 if we invest wisely.

India’s story proves that with political will, a focus on education, and innovation, millions of youth can be prepared for the skills of tomorrow. India’s journey demonstrates how focused investments in skills can turn demographic challenges into opportunities.

* Phapano Phasha is the chairperson of The Centre for Alternative Political and Economic Thought.

** The views expressed here do not reflect those of the Sunday Independent, IOL, or Independent Media.

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