Obama: IT Concerns

US President Barack Obama has targeted outsourcing once again in his attempt to bring back the ailing US economy on track and the clouds seem to be getting darker for Indian IT companies.

Nasscom says that this is a legitimate concern and they are indeed hoping that such moves do not get pushed through and that free trade is allowed and that the US government realises how important it is for that.

Meeting one of his major election promises, Obama yesterday announced the end to years of tax incentives to the US companies, which create jobs overseas.

He said the White House plan would save taxpayers USD 210 billion over the next decade. “It's a tax code that says you should pay lower taxes if you create a job in Bangalore, than if you create one in Buffalo, New York.”

Incentives would, instead, be given to those creating jobs and enhancing competitiveness in the US. The end of tax incentives for outsourcing would have a huge impact on the Indian economy, where US companies have been outsourcing their work.

Indian IT companies however, are not too perturbed and this is simply because of the fact that the proportion of work that they are doing is very minimal.

An Infosys spokesperson said, “The current proposal as we understand is to close down on tax loopholes in the US MNCs and crack down on their overseas tax havens. We do not believe that it has anything to do with IT outsourcing done by US corporations.”

IT major Wipro too had similar comments to make.

But this move will have an impact on MNCs like Accenture and IBM. They are still studying the fine print to understand what could be the effect of this move.

However, this move in itself is not worrying. What is worrying is the whole protectionist environment off late that is happening in the US with regard to Indian IT companies.

A week or so earlier, there had been a proposed legislation introduced in the US by senators Grassley and Durban, which could restrict the number of visas that Indian companies can apply for. This, given with the fact that they are being forced to hire more locally and given the fact that the kind of economic environment that we are in, IT companies are seeing budgets slowing down, client spends tightening up. It indeed seems that the dark clouds over the Indian IT sector are getting darker and it is going to be a tougher environment for them going ahead