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India Inc not worried by Obama's anti-outsourcing tirade

May 05, 2009 10:24 PM IST Business Business

New Delhi: US President Barack Obama is turning the heat on India with his anti-outsourcing tirade.

He has promised to clamp down on American companies exploiting tax havens abroad, which means a further hit to the already stretched Indian IT industry.

During his election campaign Barack Obama on November 11, 2008, had said, "Unlike John McCain I will stop giving tax breaks to companies who shift jobs overseas and will start giving it to companies who create good jobs in America.''

Even after assuming the presidency of the US, Obama on February 25, 2009, said, "We will restore a sense of fairness and balance... to our tax codes by finally ending the tax rates for corporation that ships our jobs overseas."

But on May 5, 2009, Obama said that job should not be outsourced to Bangalore in India.

"It's the tax code that says if you pay lower taxes if you create a job in Bangalore, India... than if you create one in Buffalo, New York," he said.

With his words Obama has hit bang on the heart India's IT industry, Bangalore.

He means business and wants to completely stop tax sops to US companies that outsourced jobs to India.

India Inc, however, is putting up a brave front.

IT major Infosys says, "The current proposal is to close corporate tax loopholes. We do not believe that it has anything to do with IT outsourcing done by US corporations."

Some even say Obama's banging the door on Bangalore indicates the city's IT power.

"I can't really blame Obama for saying Bangalore vs Buffalo. It is a great sound byte. Bangalore has gone way beyond city to a verb," said Priya Chetty Rajagopal of the Indo American Chamber of Commerce.

Yet, Obama's constant anti-outsourcing tirade is worrisome. The industry's worries are understandable especially since India gets more than 60 per cent, or $70 billion, outsourcing work from the US.

But Partner in XSearch, Suhas S Nerurkar says there would be little impact of such a move.

It is not the first protectionist move the US has made since Obama took charge.

The US also plans to ban H1B visa hiring for companies receiving bailout money. The ban is likely to hit 21,667 Indian techies hard.

For the Indian IT Industry, already hit by the global recession, President Obama's stand on outsourcing could not have come at a worse time.

(With inputs from Deepa Balakrishnan)

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