This story was originally reported by PRI’s The World. For more, listen to the audio above.
Many companies in India have created a sizeable industry by offering cheap information technology work to foreign companies. A new wave of economic protectionism in the United States has begun to threaten the booming industry. Ohio’s governor Ted Strickland recently signed an executive order banning the outsourcing of government IT projects to foreign countries, like India.
The move itself “probably won’t have too much of an impact,” Kartikay Mehrotra, a business reporter for Indian Express, told PRI’s The World. It is, however, part of a larger sentiment of protectionism that the US is portraying to India. Recent legislation by Congress that raised fees on H-1B non-immigrant work visas also has many Indian companies concerned.
Business from the US public sector actually represents only a small portion of the overall demand for offshore services, according to the National Association of Software and Services Companies, an umbrella group in India. Investment has been pouring into the country recently from Europe and even some from Japan.
At the same time, India has little recourse to stop the protectionism from Ohio. Mehrotra points out that “India did not sign the [World Trade Organization] agreement on government procurement. So they’re just an observer on that WTO committee, which is where they would have to take this kind of issue.”
President Obama is planning on visiting India in November. Mehrotra points out that George W. Bush was welcomed with open arms there, due in part to the money that was flowing into the IT sector. Mehrotra doubts that the upcoming meetings will be contentious, but questions remain about how much money will continue to flow from the US into the Indian IT sector, and whether similar outsourcing bans are likely to follow.
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