Ahmedabad: The beleaguered Gujarat state has been in the news for all the wrong reasons of late. But, for a change, there is some positive news emanating from here. Recently compiled data has revealed that Gujarat has emerged as one of the favourite destinations for foreign companies interested in outsourcing their business.

According to the Gujarat chapter of the Confederation of Indian Industry (CII), as many as 26 companies are doing business process outsourcing (BPO) with the state. The state earned a revenue of Rs 25 crore in 2001 from this sector. BPO as an activity has been growing at a rate of 70 per cent a year and its net worth in India is $1.6 billion.

The sector employs around 1 lakh people. According to projections made by McKinsey, if BPO grows by 27 per cent by 2008, the activity will deliver a revenue of $17 billion, employing 1 million people in the process.

''BPO is a cost-effective business for foreign companies. Most companies from developed countries prefer to have their work done by hiring skilled services from developing countries,'' says CII (Gujarat chapter) senior director Sunil Parekh. As per a comparative analysis, accounting which costs $4,000 to a US-based company will cost just around $80 in India. Thus, the savings effected by a US-based company are enormous.

''Indian firms are not at a loss either as they get such assignments in bulk on a long-term basis,'' adds Parekh. Moreover, wage differentials are another major advantage that India has over others. Net margins in India are 20-25 per cent compared to 5-10 per cent in Europe. The main sectors in which outsourcing is being carried out are accounting, IT software development, medical transcription, legal transcription, mapping and equity research among others.