India & Europe Win-Win Game 1 India & Europe How to create a Win-Win game in IT ? IIT Delhi - 24 November 2008 Dr. Jean-Joseph BOILLOT Economist India-China Cofounder Euro-India Economic & Business Group

India & Europe Win-Win Game 2 Challenges ahead Economic catch up: magnitude and lag Population challenge: the Window of Opportunity Global challenges: see climate change The Services Revolution Challenges for Europe Challenges for India

India & Europe Win-Win Game 3 India and Europe 2025: still distant

India & Europe Win-Win Game 4 … even more per capita

India & Europe Win-Win Game 5 How long the Demographic Window of opportunity? : INDIA: annual rate of growth total and active population ,5 0,0 0,5 1,0 1,5 2,0 2,5 3,0 Total Pop old15-59

India & Europe Win-Win Game 6 The World Population (billion)

India & Europe Win-Win Game 7 Same in percentage, Different picture!

India & Europe Win-Win Game 8 Even more with the years old group

India & Europe Win-Win Game 9 The Earthquake on the global labor Market 5 years incremental variation of the age group % total world

India & Europe Win-Win Game 10 CO2: a good exemple of the sustainable challenge

India & Europe Win-Win Game 11 II-The Services Revolution and the standart Economic Theory

India & Europe Win-Win Game 12 The Services Revolution and the standart Economic Theory

India & Europe Win-Win Game 13 The Services Revolution and the New Economic Theory of imperfect competition and localisation 1/ The ITC revolution allows an increasing number of services to be produced at TIME and PLACE different from the place of consumption. 2/ The production any services can be henceforth distributed internationally according to the comparative advantages of territories and of the competitive strategies of firms. 3/ The economics of services gets more and more closer to the standart « industrialisation model » and « imperfect competition » : high specialisation, return to scale, cluster and size benefits etc…

India & Europe Win-Win Game 14 Outsourcing: just a begining!

India & Europe Win-Win Game 15 Global Gains, yes, but what distribution? Country advantage (45-55% savings) Vendor advantage (30-40% savings) Original Cost base Factor Cost Savings Additional Telecom & manage- ment costs Off-shore Location cost Consoli- ation, Standar- Dization & superior skills Task Reengi neering Econo- mies of scale Process Reengine -ering New cost base Task migration Task level improvement Does not Include gains from Over-delivery and continuous improvement

India & Europe Win-Win Game 16 And Europe swandich between the USA and India GrowingEmbryonicMature End of cycle Timing Low (High) Contract manufacturi ng IT Offshoring Accounting HR Call centers Banking BPO High (Low) Maturity (Value Add) R&D/Innovation Knowledge Processes How to reopen the pathway to India with a mixed strategy

India & Europe Win-Win Game 17 III- Dual challenge Europe and India a/ for Europe The Brain Drain between Knowledge Based Economies: the EU Human Capital Outflows to the US (Ahmed Tritah survey, CEPII 2008) 1/ EU brain drain to US is about a small number of individuals, but the share of Europeans who are leaving is increasing as one moves along the educational distribution and ladder of occupations that matter the most in the knowledge economy. 2/ Using productivity based brain drain indices it is found that aggregate human capital conveyed by emigrants has increased since the 1990s. 3/ Finally, as a proxy for the of human capital embodied in EU emigrants, Europeans earn a positive wage premium relative to the US natives and even higher for the most recent expatriates cohorts, providing further evidence that the quality of European emigrants has increased.

India & Europe Win-Win Game 18 a/ for Europe (2)

India & Europe Win-Win Game 19 b/ for INDIA

India & Europe Win-Win Game 20 Understanding better the EU New Economic Geography in our Globalized World