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India’s rural population continues to flow towards the urban centers for work and skilled labor (including knowledge workers) move from the second-tier cities to the main hubs of Delhi, Calcutta, Bangalore and Mumbai.  The national government is trying to redirect migrants to the second tier cities to prevent slums from forming, and knowledge industries are increasingly looking at second tier cities as salaries in the major cities, especially Bangalore, skyrocket.  A recent college graduate can expect to make $300 a month in Delhi, over $500 in Bangalore and $150-$250 in a second tier city.  Service outsourcers have noticed this, and as the data infrastructure improves in second tier cities, the 50% savings on labor is making many companies reconsider Bangalore as a destination.  The nature of many service providers’ operations in India make the college graduates almost a commodity and demand can be easily met in the second tier cities for all but R&D activities.

Unskilled, and even skilled, labor is abundant and the shortages seen in Eastern China and Southern Vietnam are not an issue.  Workers are often satisfied with a lower standard of dorm or hostel (if any) than those in East Asia, who have come to expect sprawling dorm towns with limited, but still present amenities.  In India, such housing and other issues tend to take care of themselves, however the result of this is that transport systems are not as organized as in China or Vietnam, so like much else in India decreased efficiency is traded for low cost.

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