The Coming Death of Indian Outsourcing?

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 |  Includes: ACN, CTSH, INFY, PTI-OLD, SAY, WIT
by: Mark J. Perry

From a Forbes article by Sramana Mitra:

Forbes recently published some scary statistics on wage inflation in India. (See "Indian Employees Enjoying Swift Pay Hikes.") Salaries rose 15.1% in 2007, up from 14.4% the previous year. The 2008 forecast: 15.2%. This would be the fifth consecutive year of salary growth above 10%.

Add to that the appreciation of the rupee against the weakening dollar (11.5% in 2007), and its impact on the labor arbitrage market.

Is the death of Indian outsourcing all that far off?

Assuming a 15% year-to-year salary hike rate, and a 2007 cost advantage of 1:3 in favor of India, if U.S. wages remain constant, India’s cost advantage disappears by 2015. Then what?

(HT: Mad Toothfish)