How India got the Cheap Labour nation tag?
- The supply of labour in India far exceeds the demand, the country itself is the world’s 2nd largest labour market, only after China
- Despite being pretty close to China in labour workforce the country lacks the indigenous Industrial development like China to employ those people
India, the most populated country in the world surpassed China in terms of population in 2023. The country contributes to 17.3% of global population which is massive at 1.4 billion people. However unlike China the country lacks the indigenous economic/industrial development to employ its huge chunk of population despite having 65% of youths aged under 35. Among youths the unemployment rate is more than 15% which indicates the unutilized potential of the nation. The root cause of getting the tag of “cheap labour nation” for India started from here.
Out of 1.4 billion people India has given some of the world’s top talents from its soil. Some of the big names here include Google CEO Sundar Pichai, Microsoft CEO Satya Nadella, IMF economist Gita Gopinath, Mastercard CEO and World Bank’s president Ajay Banga and so on. All the big talents around the world are inspiration to Indian youths chasing dreams and it is not limited to borders. A data shows that over half of Indian youths plan to study abroad and in 2025 alone over 2 lakh people have renounce their Indian citizenship.
Before we move to our main topic here’s a story of a one security Guard’s daughter who got placed in Amazon Seattle office after doing her masters from USA.
A tale of Security Guard’s daughter in Bengaluru placed in Amazon after doing her masters in USA
A security guard named Venkatramana who works in a G4S security agency bursted in tears on an auspicious day of 13 May, 2026. His daughter named Yamini just bagged a job at Amazon’s Seattle, WA office after doing her masters in USA.
A proud father showcased his daughter id card sent by her thanking for all the sacrifices made by him to make her realise her true potential.
Well this story is not about the job, nor it is about the success but about the aspiration even an average security guard and his daughter holds to escape India in search of better quality of life and opportunities which the country fails to provide primarily due to poor governance. This is just one of the story of millions of those youths who want to escape the stagnant wage in India but only few make it to the finish line. The ones who can’t end up being a part of cheap offshore hiring process and this is where naming of cheap labour nation tag for India begins.
Stagnant Wage in India
The reason why India got the cheap labour nation tag is the stagnant wage. A big chunk of Indian population earns around ₹10,000 ($103) a month. Majority of them are in informal sectors while in formal sectors the situation is more or less the same. In informal sector there’s minimal legal and formal contracts due to less or no regulation by the government. 90% of men and women are employed in informal sector. Interesting thing here is the half of India’s GDP is generated by them.
The Indian IT industry has literally saw no increment in salaries of entry-level employees in a decade. This industry employs the most Indian youths than any formal sector. According to Moneycontrol the salary of entry-level employees in IT sector grew just by 45% in a decade. This doesn’t even cover the inflation and rupee depreciation that country faced in the same time.
The Indian IT industry holds 50% share in global outsourcing market and it employs more than 5 million people directly. Majority of these employees are freshers who get in-hand salary that ranges between ₹16,000 ($166) to ₹20,000 ($207.50) a month.
Outsourcing in India – Savings upto 70%
To leavarage the stagnant wage many companies setup their outsourcing services in India. This includes for the job like BPO, IT and software development. Biggest Indian IT companies like TCS, Infosys, Wipro offer their own outsourcing platform for seamless service but still many companies from USA and Europe has setup their own outsourcing offices for higher profits on long term.
Outsourcing in India allows companies to save 40 to 70 percent cost on labor because of huge pool of unutilized talent. Chris O’Leary who outsourced his web development to India says “even a least experienced person here in USA will cost more than an average web developer in India with fairly good experience and skills”.
English is second or third language to many Indians so it makes the global outsourcing even more easier and that’s why the world loves to outsource in India.
24/7 Work – Only in India
While in other countries like USA and Europe where work timings are strictly regulated the exact opposite happens in India. Indians work round the clock. Doesn’t matter it is IT or manufacturing. This is the exact very reason why some of the world’s biggest companies have setup their factories in India primarily for export purpose while in IT industry companies get flexible timings.
Japanese automotive giant Suzuki utilizes cheap labour of India to maximum possible extent by its joint venture Maruti Suzuki by exporting 40% of India’s automobiles to 15 countries. The factories of the India’s largest automaker operates on 24/7 basis.
Foxconn too have its largest factory outside China to leavarage the cheap labour of India. The company has invested close to $2 billion in Bengaluru alone which is known as the “silicon valley of India”.
Upto 80% Less R&D Cost
Indian is not just hub to global outsourcing, the country has also excelled in research and development process hosting GCCs (Global capability centres) of 1950+ companies. The big names in the list are as follows:
- Cisco
- Pfizer
- Microsoft
- Bosch
- Intel
- Amazon
- Hyundai
- Mercedes-Benz
- BMW
India provides 70 to 80 percent low R&D cost that attracts the companies from all over the world to setup their GCCs in India. It is primarily because of huge technical talent, India produces 10 million graduates/year, out of these about 1.5 million are technical ones, this creates the world’s largest technical talent which is utilised by MNCs across the world at dirt cheap prices. Low opportunities is a key factor here. While most of the R&D done by MNCs are in their respective countries India just acts as a technological back end office in many cases.
40% Of Graduates Unemployed
As we’ve discussed above that India produces 10 million graduates every year. Data shows that around 40% of them remain unemployed. A report by Times of India suggests that in 2023 67% of India’s unemployed youths were graduates. Too many graduates, too few jobs – The simple demand and supply law of economics apply here that acts as a catalyst for India being a cheap labour nation.
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