CONSULTANCY SECTOR IN INDIA - A REVIEW

(with focus on management & technical consultancy)

BACKGROUND

One of the world’s largest economies, India has made tremendous strides in its economic and social development in the past three decades and is poised to achieve even faster growth in the coming years. Ireland is an example that has been using knowledge effectively to enhance its growth. India can no doubt reap tremendous economic gains by developing policies and strategies that focus on making more effective use of knowledge to increase the overall productivity of the economy and the welfare of its population. The time is very opportunate for India to make its transition to knowledge economy-an economy that creates,disseminates and uses knowledge to enhance its growth and development.The concept knowledge economy must be broadly considered to cover how any economy harness and uses new and existing knowledge to improve the productivity of agriculture, industry and services and increase overall welfare. In the backdrop of the above it can be understood unambiguously that consultancy sector has a significant role to play in transforming India to a knowledge economy. Consultancy itself is a knowledge-based profession and consultants play a key role in technological, industrial, and economic developments and are effective agents of change in society. Management and technical consultancy form a major chunk in the overall gamut of  consultancy profession. Manufacturing, agriculture, power, construction, and transportation were estimated to be the largest sectors for consultancy.

CONSULTANCY SCENARIO

If we look back over the course of the last forty years, technological dynamism and innovation have not been hallmarks of Indian economy,of course with some exceptions.As a result, technical consultancy in the country remained in its infancy. Until the late 1980s most of the growth in consultancy profession was state – sponsored and there was public sector domination in the infrastructure areas. Over the last decades,private investment flows in the economy have increased significantly, particularly in reserved sectors, resulting in increased opportunities in the domestic market.The shift from state-controlled economy to private sector participation opened up new markets for consultancy services.Globalisation and IT has further opened new vistas of opportunities for Indian Consultancy organizations.The performance of Indian consultants has been progressing. The service sector contributes around 50% of GDP. The current size of the Consulting industry is about INR 10000 crores including export. Around 46% of consultancy contracts were in West Asia. As per 2002 data of FIFO India’s share in global trade in service was about 1.3% and share of consultancy export is about 0.5% of global trade in services. No doubt, there has been a steady growth in the consultancy sector particularly in management and technical consultancy but there is need for an exponential jump to be a catalyst in transforming Indian economy into knowledge economy. In the developed countries there is one management consultant for every 2200 working persons. Whereas in India the rate works out to about one consultant for every 190,000 employees in industry and commerce. For a country of India’s size and complexity, this is woefully inadequate.

INDIAN  EDGE

India has many key ingradients for making this transition to knowledge economy.It has a critical mass of skilled, English speaking knowledge workers ,particularly in sciences/technology. It has best and state of art technical and management institutions of international repute churning best workforce to take up challenging jobs. It has a well-functioning democracy. Its domestic market is one of the world’s largest. It has a large and impressive diaspora, creating valuable knowledge linkages and networks. Further it has macroeconomic stability, a dynamic private sector, institutions of a free market economy, a well-developed financial sector, and a broad well diversified science and technology infrastructure. Building on these strengths, India can harness the benefits of the knowledge revolution to improve its economic performance .Indian consultants have experience that is directly relevant to developing countries.The emerging multi-disciplinary character of some large Indian consultancy organizations is the result of their attempts to enter markets overseas,besides giving competition to foreign consultancies for large projects within India.

KNOWLEDGE & INNOVATION POTENTIAL OF INDIAN CONSULTANCY SECTOR

The Innovation system in any country consists of institutions, rules and procedures that affect how it acquires, creates, disseminates, and uses knowledge. Innovation in a developing country concern  not just the domestic development of frontier-based knowledge but it also relates to the application and use of new and existing knowledge in the local context. Consulting and R&D organizations have a significant role to play in this context. India is taking bold steps to strengthen its R&D infrastructure, developing technological innovations, and altering the mind set of its people towards better creation, acquisition, and use of technology.It is endowed with a critical mass of scientists, engineers,and technicians in R&D and technical consultancy.  Many cities like Hyderabad, Bengaluru & Gurugram are turning out to be a home to dynamic hubs of innovations. Liberalization and globalization are further compelling R&D institutions to focus more on knowledge and innovations to be competitive in the global market. In the process of commercialization of knowledge ,consultancy has a significant role as a bridge between knowledge generating institutions and industry. The global competition and the level of expertise required to develop a specific technology make it imperative to have R&D collaborations at all levels including with consultants. At present most CSIR laboratories are imparting consultancy servives in diverse areas of research. Consultancy organizations in India are directly and indirectly supported by more than 2900 R&D institutions and research laboratories, including the chain of national laboratories under the CSIR as well as other major scientific organizations . There is a large database of technologies that are available for transfer from laboratories. The consultants have a significant role to play both in technology transfer and consultancy development. It is quite evident that India has a very widespread network of R & D set up. It has good networking with consulting organizations for technology transfer and product development. Despite these accomplishments, India spends only a small fraction of its GDP on R&D.It gets very little in worldwide royalty and license fee receipts.Regarding scientific and technical articles in mainstream journals, India matches the performance of China, but the contributions of both countries are very low compared with those of developed countries. India’s share of global patenting is also small but is increasing steadily.

 PROBLEMS & BOTTLENECKS

India has a large skilled and trained workforce including scientists, designers and engineers, strong R&D facilities, and vast industrial capabilities. There is immense potential for  growth of consultancy sector in India including for export of services. However domestic consulting capabilities needs to be further strengthened and skills be upgraded continually in several sectors since consultancy sector has not kept pace with the industrial and economic developments over the years.It has become further important in the context of new policy environment and WTO. The Indian consulting profession is not well integrated either with the rest of the industry or with academic and research institutions. Most international consultancy organizations from the developed nations have a large capital base and demarcate funds for R&D to develop processes and methods and become licenses. Even in non-technology areas like management consultancy, international consultancy organizations deploy resources to streamline process and ensure a system that employs re-usability aspects in their projects. Another prominent issue in the Indian consulting profession is the need to develop core-competencies. It is also less developed in terms of self regulations which hinders credibility of the profession. There is no doubt that technical consultancy will grow rapidly in the coming years, but it is moot whether we have prepared ourselves sufficiently for this change. The biggest issue is not that of Knowledge,expertise or skills in the consultancy profession, but of ethics.Profession needs to have strict codes of conduct and self-regulating mechanisms. Another major problem in engineering consulting is the lack of central legislation governing the profession. Professional bodies of Engineers have been trying for it for a long time.Even the draft for the same is still lying pending in the Central government offices. Lack of regulatory mechanism affects quality as well as conducive growth of engineering consultancy sector. This problem is more prominent in the case of civil & structural engineering which directly deals with public safety. It is causing problems in terms of status and accountability for the Consulting in Engineering sector. India is still not a permanent member of EMF, and it restricts the mobility of  Consulting Engineers to undertake overseas consulting assignments. The consultancy services have not grown to the same extent as the economy has grown,either horizontally in terms of scope and services or vertically in terms of returns and turnovers.

SUMMING UP

The notion  of a knowledge economy is not new to India. India’s past achievements in science, philosophy, mathematics,and astronomy reinforce the notion that the country has for millennia been a leading “knowledge society.” Now again India is poised to become a “Knowledge society.” It simply cannot afford to miss the knowledge revolution. Consulting profession particularly technical and management consultancy by virtue of being a knowledge-based profession has a significant role to play in realizing this dream. This sector has progressed steadily over the years, but its pace is not adequate in view of the rate of growth of the economy. Consulting sector must act as a catalyst in transforming India to a knowledge economy in this century. India has a vast pool of qualified Engineers, scientists and technologists and has many innovative advantages as outlined earlier. India is well positioned to take advantage of the knowledge revolution to accelerate growth and competitiveness. The government must understand and facilitate growth of the consulting sector by removing all bottlenecks e.g., enacting central legislation to regulate the profession and ensuring permanent membership of EMF. Consulting organizations must upgrade their skills and learn to be ethical and abide by their code of conduct. It is necessary to establish their credibility. Organizations must learn to pool their resources and form joint ventures or consortiums to be competitive in the global scenario. Consultancy firms particularly technical and management must invest in R&D to develop processes and methods. Getting patents and becoming Licensers must become a culture in Indian Consulting sector. It will take Consulting to new horizons and will help it to be a catalyst for transformation of the Indian economy. The future of Indian Consulting sector particularly management and technical consultancy has immense potential.

Author: MANOJ MITTAL, Civil & Structural Engineering Consultant based in NOIDA.

NOTE: various data contained in above write-up have been taken from Consultancy Development Center, Engineering Council of India publications and WBI development studies reports apart from own experiences and knowledge. Figures may not be updated but it does not change the arguments and the points being made.