The advances in Information and Communication Technologies (ICT) have facilitated the trend of outsourcing of business services worldwide. This trend has invoked mixed reactions in different parts of the world. While large corporations in developed countries are under increasing pressure to outsource services from developing countries to be competitive, the trend of outsourcing of services from low cost centers has raised severe concerns about loss of jobs in these countries. However, this trend has clearly emerged as a new growth engine for developing countries like India. This paper first takes a synoptic view of outsourcing of services from India by studying shifting trends in India's services exports, its effects on employment and India's position in world business services export market. It also attempts to understand the prospects of outsourcing in India in terms of future potential of outsourcing, employment generation and sustainability of outsourcing from India amongst challenges from importing countries, emerging competition from other developing countries and problems of infrastructure and data security, increasing manpower costs, etc.

Services have been contributing a larger part to the world GDP, but still contribution of services to world trade is very less due to the non-tradability of services. However, developments in Information and Communication Technology (ICT), have made it possible to `splinter off' services embodied in the provider and made it possible to deliver it through telecommunication networks at distant locations. These developments have given rise to a phenomena called outsourcing of services.

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