Obama's IT Protectionism Rattles Indian IT Industry - InformationWeek
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2/27/2009
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Bob Evans
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Obama's IT Protectionism Rattles Indian IT Industry

President Obama's plan to penalize U.S. companies that use outsourcers from India and other countries will hurt the U.S. economy, the Indian economy, and the global economy, according to officials from the Indian technology industry. While it's not exactly a shocker to hear India's $63 billion IT and BPO market express such reactions, they underscore the central issue of just how damaging such a policy would be.

President Obama's plan to penalize U.S. companies that use outsourcers from India and other countries will hurt the U.S. economy, the Indian economy, and the global economy, according to officials from the Indian technology industry. While it's not exactly a shocker to hear India's $63 billion IT and BPO market express such reactions, they underscore the central issue of just how damaging such a policy would be.In a recent post I noted that Obama's core argument is his belief that the U.S. has some proprietary claim on what he calls "our jobs" and that his proposed policy will somehow "restore a sense of fairness and balance" to our tax code by raising taxes on companies that, as he put it in language from another age, "ship our jobs overseas."

That kind of populist tub-thumping might play well to certain segments of the organized-labor movement but out in the real world it would have a terrible impact on the ability of American companies to compete in the global marketplace. And it would also have an equally damaging effect on Indian IT services companies whose operations have become central to American competitiveness.

In a roundup of reactions from various tech-related organizations in India, the Hindustan Times offered these impressions from leading IT industry association Nasscom; from Infosys; and from another industry group:

Som Mittal, president of the National Association of Software and Service Companies, said IT outsourcing helped business efficiency for "vital competitive edge" to US firms, while leading firm Infosys echoed the sentiment.

"The US is a very open economy and a strong proponent of free trade globally. We are confident that the US will not take any measures, which might hurt its global competitiveness. We need to wait for more details to understand the import of President Obama's statement," it said.

Industry chamber FICCI said "protectionist measures of any kind could deteriorate the situation further"-referring to the global slowdown.

And the Economic Times of India noted this reaction from another official of the FICC industry group:

Amit Mitra, Secretary General, FICC said that this is a matter of grave concern not only for India but for the US also.

He said, "Perhaps what is wrong in this is, he [President Obama] may not have had the opportunity to read the literature of his own US Chamber of Commerce. When he does and if he does, he will know that he is really punishing American companies, not Indian companies only. Our sense is that this is something that has been in the offing. My feeling is that they are cutting their own nose to spite the phase [face]."

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