US 'protectionist' tone worries India Inc

MUMBAI/BANGALORE, INDIA: A delegation of Indian IT companies will visit the United States next week to raise their concerns over what they fear are protectionist measures that could harm the $60 billion industry.

Analysts said a proposed new tax code by President Barack Obama that would end tax breaks for firms that create jobs and profits overseas was unlikely to hurt Indian outsourcers, but the move has spurred worries of future curbs on technology work that is sent overseas by U.S. companies.

"The new tax code the U.S. is implementing will be applicable to companies headquartered in the U.S. who retain their profit overseas and do not repatriate that to the U.S.," said Ameet Nivsarkar, vice president of global trade at lobby group Nasscom.

"However, the tone of the U.S. administration and all the legislation which is being passed, be it the border security bill or Ohio statement, is increasingly protectionist and the trend is definitely a cause of concern."

Nasscom, or the National Association of Software and Service Companies, will lead the delegation to the United States to lobby with the administration against any move to curb outsourcing.

Obama's reported comments on the tax breaks came on the heels of a ban by the U.S. state of Ohio on outsourcing government contracts funded with state money.

Nasscom termed the Ohio ban "electoral rhetoric" and said the move would be counterproductive for the United States.

Costlier visas

Also, a new U.S. immigration bill will raise the cost of work visas, hurting Indian firms like Infosys Technologies and Tata Consultancy, which send a large number of staff to the United States for onsite projects.

The Indian outsourcing sector generates about 70 percent of its revenue from the United States.

The customer list of the Indian companies such as top sector player Tata Consultancy, second-ranked Infosys and No. 3 Wipro includes top global corporates such as General Electric, Goldman Sachs and BP.

"These moves and announcements seem counterproductive to government's effort to reduce deficit," Wipro said in a statement, referring to the United States administration.

Analysts say U.S. moves at the expense of outsourcers stem from the Obama administration's efforts to bring down an unemployment rate persistently near 10 percent and stimulate a sluggish economy ahead of the November congressional elections.

"What we are more worried about is the larger trend, this could lead to a rise in many more such orders coming in...it reflects the tone of the government," Nivsarkar said. "The last thing we want is a trade war."

The Indian government has also opposed Ohio's outsourcing ban, with federal Trade Minister Anand Sharma telling reporters that the "protectionist tendency" in the United States would deepen recession and delay global economic recovery.

India's outsourcing sector employs more than two million people, mostly young workers who boost demand for everything from luxury apartments to electronics gadgets to cars, and accounts for more than 5 percent of the country's total economic output.