RURAL DEVELOPMENT IN INDIA: FROM CATTLE HERDING TO DATA

UNCLAS SECTION 01 OF 03 CHENNAI 000133

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINT EIND PGOV PHUM PTER IN
SUBJECT: RURAL DEVELOPMENT IN INDIA: FROM CATTLE HERDING TO DATA
ENTRY



1. SUMMARY: Local government and non-governmental organizations
have established innovative rural development initiatives in the
South Indian state of Tamil Nadu. An entrepreneurial district
administrator has used pre-existing development funds to establish
India's first-ever rural business process outsourcing (BPO)
facility. The BPO gives rural youth employment alternatives that
are normally associated with urban job markets while infusing
capital into rural communities that have been reliant on traditional
livelihoods. Moreover, departing from their default shoot-and-kill
approach to the Maoists that are present in 70 villages in the
district, the local authorities deliberately use the BPO jobs as a
tool to inoculate vulnerable youth against Maoist ideology. In a
separate and larger scale initiative, an NGO has helped organize
rural women into a cooperative doing contract work for labor
intensive manual tasks -- assembling watches, setting gems in
jewelry, de-burring machined aircraft engine parts -- for a major
Indian industrial house. Both initiatives are promising, but their
sustainability depends on the interest of the local government and
NGOs who provide critical mentoring and liaison with private sector
clients. END SUMMARY.

Local Government Moves Young Farmers into Data Entry
--------------


2. On Monday April 7 Consulate staff met with Krishnagiri District
Collector Santosh Babu, who has been instrumental in the creation of
India's first rural BPO. Krishnigiri is a primarily rural district
along Tamil Nadu's northwest border with Karnataka. Babu introduced
the Fostering Technologies in Rural Areas (FosTeRA) when he began
his tenure as district collector in 2006. Babu's program provides
rural youth with training and employment in the BPO sector. Through
FosTeRA's three-month training program, local youth learn data
entry, typing, and computer skills, in addition to English language
instruction. FosTeRA requires participants that can read and write,
and most have completed at least their secondary education or have
some classes in higher secondary education. Babu describes the
program as a tool through which rural families can participate in
India's economic growth. There are currently two FosTeRA centers in
Krishnagiri, a training center and an outsourcing office, with plans
to introduce at least three more into villages further afield.


3. Babu started FosTeRA using discretionary development funds made
available to him by the central government. He said it cost $50,000
to set up FosTeRA's first training center, adding that $12,500 of
the cost was paid to Microsoft for Vista licenses. (NOTE: Babu
said that in the future he planned on seeking reduced price licenses
offered by Microsoft. END NOTE.) Citing the availability of
development funds for district collectors, Babu characterized the
start-up cost as inconsequential: "money is not a problem."
FosTeRA has also drawn support from local politicians. The
district's Member of the Legislative Assembly (MLA) provided the
funds required for the second FosTeRA training center. A council of
government officials oversees FosTeRA's progess and has also been
instrumental in identifying new areas for future training and
employment centers. (Comment: According to Babu, the FosTeRA model
does not need government assistance, however the willpower and
financial capacity behind the district's bureaucracy appears to be a
driving factor in the initial success of the project. End
Comment.)

Targeting the Program to Combat Maoist Influences
--------------


4. Krishnagiri district has a history of Maoist activity, and media
reports about FosTeRA have described it as directed at keeping rural
youth away from Maoist influences. Tamil Nadu, like the other
states in South India, has traditionally focused on a shoot-and-kill
approach to combating Maoists, so a livelihoods-focused approach to
keeping Krishnagiri's youth from turning to Maoists represents a
diversification in strategy. Babu said he regularly receives lists
of vulnerable youth who should be considered for FosTeRA training
from Krishigiri's Superintendent of Police. The coordination with
the police intelligence units allows district government to provide
income and skills to idle youth who otherwise might be susceptible
to Maoist ideology. During our visit to one of the FosTeRA centers
the local program administrator identified two young men as having
been specifically targeted for training because of their prior
association with the Maoists.

Modern BPOs in Rural India
--------------


5. Consulate staff visited a training center and an employment
center in the area to observe and interact with students. The
training center, in a small village approximately 10 kilometers off
of the national highway, is a recently converted building with
approximately 40 workstations, two servers, and a battery providing
six hours of backup power. The MLA who sponsored the building
proudly noted it was one of the few buildings in the village with
air conditioning. The center has around 40 male and female
trainees, many of whom entered the program as farmers or housewives

CHENNAI 00000133 002 OF 003


and began training late last year. These students are currently
half-way through their training module and have shown marked
improvements in their typing and communication skills, according to
one of FosTeRA's directors. FosTeRA participants told Consulate
staff they are excited by the employment opportunity the program
provides them, and many told Consulate staff that they were not
employed before they began the FosTeRA program.


6. Consulate staff also went to FosTeRA's first training center,
which is now a fully operational BPO, in Sanasandhiram village just
outside Hosur, about 20 miles from Bangalore in the neighboring
state of Karnataka. The center is located in a former community
center that was donated by the village and has been refurbished with
workstations, a conference room, servers, and backup power supply.
The project director highlighted the badge reader for access control
and the LED projector used for training sessions. The center was
established in 2007 and employs around 50 local youth from the
surrounding area in two single-sex shifts, with plans to eventually
introduce an overnight shift as well. There are about 500 families
in the village, about ten percent of which have directly benefited
from their son or daughter's participation in FosTeRA. The
program's local director told us that the BPO's employees usually
receive around 10,000 rupees per month (around 250 USD),which is
markedly above the average income for rural India. According to one
local shop owner, his business has improved by twenty percent since
the FosTeRA operation began. Many of the center's employees we met
were young women who still help their families care for cattle, the
village's traditional livelihood. (Comment: By remaining in the
village, FosTeRA's employees are able to maintain their familial
ties and retain a sense of community that can often be lost when
seeking employment in larger cities like Bangalore. End Comment.)

Former Farmers Do Allstate's Data Entry
--------------


7. After training, the FosTeRA participants do basic data entry,
taking lists of information provided to them by U.S. insurance
company Allstate and entering the information in Excel spreadsheets.
Currently, FosTeRA provides BPO services to two U.S. companies:
Allstate and EDS. FosTeRA's director told us they are in
negotiations with Yahoo for additional business. FosTeRA also
provides some BPO services to the Krishnigiri district government as
payment in kind for the government's initial support. The director
acknowledged that currently they are capable of performing only the
lowest level of BPO services -- basic data entry. According to
Babu and his FosTeRA colleagues, FosTeRA's capacity and capability
has grown exponentially in the last few months. They said when they
began they were unable to meet the industry's speed and accuracy
requirements, but they quickly ramped up their quality and are now
competitive with other Indian BPOs. FosTeRA's director told us that
the program's trainees have comparable skill sets and capabilities
to employees of larger BPOs in Bangalore. But FosTeRA is not yet
ready to enter the significantly more lucrative market for
voice-based call center services due to the relatively poor English
skills of the majority of their staff. FosTeRA's director said they
would only pursue voice-based contracts if they could ensure the
same standard of service expected of larger urban call centers.
Based on our conversations with the FosTeRA staff at both centers,
they are a long way away from being able to provide voice services.



8. FosTeRA's unique approach to providing technology based
employment within the rural setting allows the program's
participants to retain their ties to family while also improving the
financial prospects of their villages. According to FosTeRA's
program director, only two employees who received training through
FosTeRA have left the village BPO for work in Bangalore. The
director said that these former students are now interested in
returning to the center because the high rental prices and
comparable wages in the large city do not provide them with the same
level of income generation.

NGO Catalyzes a Rural Manufacturing Success
--------------


9. Myrada, an NGO working in three South Indian states, also
provides rural employment in the Krishnagiri district. Myrada runs
employment and self-help projects aimed at women and children.
According to M.C. Shivarudrappa, Myrada's local project coordinator
in Krishnagiri, about 8,000 individuals are employed through the
NGO's work in the district. Many of the women Myrada helps have no
former training and little education, and the NGO is committed to
helping them become self-reliant and confident members of their
respective communities.


10. On April 8 consulate staff toured various workshops that are
part of Meadow Enterprises, a stand-alone business that was
established with the support of Myrada. Meadow is a sprawling
operation on the outskirts of Hosur, a small town located
approximately 20 miles from Bangalore. Shivarudrappa explained the
long process by which Myrada helped incubate what ultimately became

CHENNAI 00000133 003 OF 003


known as Meadow. He said Myrada began encouraging women in
self-help groups (SHGs) it had helped organize to try to get into
light contract manufacturing. After a couple of failed experiments,
Myrada linked the SHGs with Titan Industries, India's largest watch
making company (part of India's Tata Group),in 1998 to have the
women assemble of metal link watchbands. Myrada provided an initial
investment of about $37,500 to pay for a location for the assembly
work and training in the assembly process. Shivarudrappa said that
Myrada did considerable handholding in the initial stages, with its
professional staff helping the SHGs, which are made up of largely
uneducated rural women, to interface with Titan and understand the
company's requirements. But when the women showed a great deal of
aptitude and appetite for the work, Titan gave them more. By 1998
the SHGs joined together to form a legal entity -- Meadow
Enterprises -- which directly contracts with Titan. Meadow has been
self-sufficient ever since, having paid Myrada back for the initial
investment, and now actually employs Myrada's professional staff to
assist them.


11. Over time Meadow has increased the range and complexity of the
work they do for Titan well beyond the simple manual assembly of
watch bands. They now do all of the manual aspects of Titan's watch
assembly, as well as setting gems for Titan's premium jewelry line
"Tanishq." Meadow even has one workshop which helps de-burr and
polish metal parts for Pratt and Whitney aircraft engines.
Shivarudrappa explained that Meadow Enterprises now does
approximately 25% of Titan's contract assembly work. Touring the
various Meadow workshops we came away impressed by the women working
there. They are all skilled and efficient at the detailed work
required of the company's contracts and have high competency and
completion rates, according to one of Meadow's floor managers. The
workshops, though rustic (often located in converted houses),
include sophisticated equipment such as presses, metal polishing
machines, microscopes, and jewelry molds. In its shops that deal in
high value items -- gold and gems for example -- Meadow takes
internal controls seriously, even frisking our officers as we left
the jewelry shop.


12. Meadow's success has translated into more than 300 high paying
jobs for a primarily female workforce. Meadow staff earn up to
5,000 rupees (about 125 USD) per month for detailed jewelry work,
watch-line assembly, and quality control. (Comment: The salary,
which is low by U.S. standards, is actually quite generous for rural
India. End Comment.) They also receive health insurance and
retirement, benefits rarely afforded to rural women. Finally,
Meadow employees receive a share of the company's profits at the end
of each year.

Comment: Two Successful Models for Rural Development
--------------


13. Meadow and FosTeRA chart two very innovative and paths to the
same goal: improving livelihoods in rural India. The paths are
different, and the challenges to replicating and sustaining both
models are substantial. FosTeRA is the brainchild of an unusually
entrepreneurial Indian Administrative Service officer. We have not
seen many like him, and it is hard to imagine other districts in
India setting up FosTeRA-based projects without Santosh Babu's
energy and vision. Moreover, FosTeRA's continued connection to
government, with local government officials serving on its advisory
board, make it susceptible to decline once the incumbent officers
move on to new assignments as they inevitably will do. Babu openly
expressed his anxiety about the project's prospects after his tenure
ends. Meadow, on the other hand, is better off in terms of
sustainability, as it has become an independent entity after its
period of incubation under Myrada's care. The pride and care of the
SHGs who operate Meadow made us believe that they are in business
for the long-term. But Meadow may be difficult to replicate because
of the level of commitment in terms of resources and time that
Myrada's incubation approach requires.


14. Comment Continued: Regardless, the employees and trainees at
both Meadow and FosTeRA are enthusiastic and proud of their work and
the benefits it provides their families and community. The two
models for rural employment we saw during our trip to Krishnagiri
confirm that sustainable rural employment that provides goods and
services to urban and international markets is feasible. But a
personal commitment on the part of local governance or an NGO
remains necessary for these projects to succeed. With that
commitment, millions of rural Indians could be given the chance to
take part in India's growth story with the added benefit of reducing
the appeal of Maoist ideology. End Comment.

HOPPER