VZCZCXRO9595
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHPW
DE RUEHCG #0133/01 1020737
ZNR UUUUU ZZH
R 110737Z APR 08
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC 1599
INFO RUEHNE/AMEMBASSY NEW DELHI 3062
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE

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