BOR: Indian IT (Outsourcing) future poses big challenges

Indian Inc is in concern about US President Barack Obama's plans to clamp down on the outsourcing industry. In his first address a joint session of US Congress Obama said that his government will not give tax breaks to US companies those offshore jobs. This move if pushed into legislation will hurt India's BPO sector and if Obama lifts tax breaks, he will make it unattractive for US companies to outsource jobs to India, which is bad news for the Indian tech sector.

In a way this is a natural exception of the US government trying to create a much more protectionist environment. This will pose a real challenge to Indian companies.

Indian companies exposed to US Markets:

Wipro's exposure to the U.S. market is 58 %.
Infosys earns about 60% of its revenue from the US
TCS exposure to the U.S. market is 50 %.

We feel taking a tough stand against outsourcing Mr. Obama has the choice between giving tax breaks to companies that ship jobs overseas or give benefit to those corporations that keep jobs domestically. Outsourcing is something which if stopped will first affect India for sure, but right after that will affect America in numerous ways. All efforts of Obama are currently focused on the revival of the US economy as soon as possible which means a turnaround in US economy is good news for India. The basic economics and logics of outsourcing have not changed, and therefore it will not impact India adversely in long term. As a sector overall our view is on watchful flow.