The increasing interest of Western companies in rapidly developing countries like India, China and Brazil came to the fore last week. Reports emerged during a visit to New Delhi by Citigroup’s chairman, Charles O Prince III, that the company planned to eliminate or reassign at least 26,000 jobs, 8 per cent of its staff. It will move many jobs to less costly American cities, and others to India. The bank has 22,000 employees in India, who are not part of the cuts.

Still, specialists warned that a continued flow of work to India required drastic improvements in its educational system and basic facilities. Water and power shortages are endemic, and industry experts predict that India could lack 500,000 engineers by 2010. Yet the country has already tapped a deep well of English-speaking engineers, attracting more outsourced work than any other country.

At the forefront of the outsourcing business is Infosys Technologies, an Indian company that has pursued a strategy of re-investing the profits from low-skilled work into a vast upgrading of skills to prove itself to Western companies and fend off rivals from China, Eastern Europe and elsewhere. Infosys devotes $65 of every $1,000 in revenue to training. IBM, by contrast, spends just $6.56, according to a 2006 proxy statement.

High-end outsourcing is only half the reason that companies are investing so heavily in India, executives say. As India has become a more lucrative market in its own right, many Western companies are looking to take advantage of its vast potential market for growth.