By Ranjit Devraj
NEW DELHI, Jan 28 2004 (IPS)

While a new U.S. federal law banning the outsourcing of government contracts will not seriously hurt Indian companies, it will certainly affect trade negotiations at the World Trade Organisation (WTO), warn political and business leaders here.

While a new U.S. federal law banning the outsourcing of government contracts will not seriously hurt Indian companies, it will certainly affect trade negotiations at the World Trade Organisation (WTO), warn political and business leaders here.

The growth in outsourcing to countries like India – of services such as accounting, billing, transcription, call centres, medical transcription and diagnosis, number-crunching, administration and anything that is information technology-enabled – reflects a desire by big companies and the U.S. government to save on costs at home.

But now the new laws are apparently designed to keep jobs domestically. In 2002, the United States spend 450 billion dollars on services outsourced to India and other countries that have educated English-speaking people such as the Philippines and Ireland and high-speed data transmission facilities.

In India, Bangalore is a major hub for outsourced work and so are Pune, Hyderabad, Delhi and Kolkata.

”They expect India and other countries to open up our markets. But when it comes to accessing their services sector they bring in anti-outsourcing laws,” said Arun Shourie, India’s minister for information technology and telecommunications, reacting to laws passed by the U.S. Senate on Jan. 22.

Shourie said the U.S. law against business process outsourcing (BPO) to India and other countries would ”worsen prospects for multilateral negotiations in trade”.

”This sends out wrong signals at a time when the U.S. and India are working with others to lower trade barriers and establish fair trade rules,” said Arun Jaitley, India’s minister for commerce and industry.

The irony of the situation was brought out by Indian information technology leaders at the at just-finished World Economic Forum (WEF) held at the winter resort of Davos, Switzerland between Jan. 21-25, which brought together political, government and business leaders.

Said Nandan Nilekani, chief of the Indian IT major ‘Infosys’ at a workshop on outsourcing at Davos: ”You asked us to liberalise our economies, you preached the virtues of globalisation, you invented the business practice of outsourcing. We merely followed your advice and used the tools that you gave us.”

Only two percent of India’s 17 billion dollar information technology market is likely to be affected by the new law, but business leaders are aghast at the trend that they say smacks of unfairness.

”Such decisions do not help the free-trade policy envisaged by the WTO,” said Ramalinga Raju, chairman of Satyam Computers, an Indian company listed on the New York Stock Exchange.

In a statement, the Confederation of Indian Industry (CII) said that ”such anti-liberalisation measures when adopted by developed countries, particularly the U.S., would lead to greater protectionism and impact global trade flow.

CII pointed out in the statement that the U.S. government pressured India to accede to ‘Singapore Issues’ in the WTO negotiations that includes giving no favours to domestic suppliers, but has now gone back on its own stand.

In a draft report on the situation, the U.N. Conference on Trade and Development (UNCTAD) has advised India to take a lead in challenging the restrictions on BPO under provisions within the framework of multilateral trade negotiations.

”India should take the initiative to see that legal restrictions placed on outsourcing are brought within the coverage of GATS (General Agreement on Trade in Services),” the UNCTAD report said.

Shourie said he believed the new law now adopted by eight U.S. states was a shortsighted move enacted in an election year in the United States- and one that would hurt the U.S. economy more than any other country.

The minister said he expected opposition to the law from affected firms in the United States that ”avail of our services as they must know the consequences to their competitiveness if they are not allowed to outsource.

Citing published studies on BPO, Shourie said that over the last five years the U.S. economy gained more than 50 billion dollars by outsourcing to India and other countries.

BPO work at first covered low-end, back-office operations for transnational companies like British Airways and Lufthansa, which found it cheaper to have their accounting work done in their Indian offices. But this later grew to include software giants such as Microsoft.

Several Indian IT majors, including Infosys, Wipro and Satyam, have entered the business of taking on contracts for large multinational firms and sometimes subcontracts of U.S. government jobs farmed out to them. All three say they have not been hit by the new U.S. law but are worried by the trend that may catch on to European markets.

According to an alliance of software companies, the BPO industry now employs more than 200,000 personnel and projected to give employment to two million people in India in the next five years.

The United States is not the only western country worried by outsourcing to India. The National Rail Network in Britain gets work done in India and so do banks like Hong and Shanghai Bank Aviva and Prudential.

Last year Britain lost 8,500 jobs to India and some projections say the figure could reach 200,000 in the next five years.

According to the Confederation of British Industry (CBI), 43 percent of British companies are considering relocating their head office functions to India and there are fears that Britain may in the long run lose even the skills required to run offices.

India’s Prime Minister Atal Bihari Vajpayee has argued that the phenomenon of BPO was the direct result of the United States and other western countries cutting back on visas and work permits for professionals.

”You can’t have it both ways. In the absence of liberal visa and work permit regimes, outsourcing is inevitable because professionals in India and other countries are highly competitive,” he said at a recent meeting here of information technology investors.

Excerpt:

By Ranjit Devraj
NEW DELHI, Jan 27 2004 (IPS)

While a new U.S. federal law banning the outsourcing of government contracts will not seriously hurt Indian companies, it will certainly affect trade negotiations at the World Trade Organisation (WTO), warn political and business leaders here.

The growth in outsourcing to countries like India – of services such as accounting, billing, transcription, call centres, medical transcription and diagnosis, number-crunching, administration and anything that is information technology-enabled – reflects a desire by big companies and the U.S. government to save on costs at home.

But now the new laws are apparently designed to keep jobs domestically. In 2002, the United States spend 450 billion dollars on services outsourced to India and other countries that have educated English-speaking people such as the Philippines and Ireland and high-speed data transmission facilities.

In India, Bangalore is a major hub for outsourced work and so are Pune, Hyderabad, Delhi and Kolkata.

”They expect India and other countries to open up our markets. But when it comes to accessing their services sector they bring in anti-outsourcing laws,” said Arun Shourie, India’s minister for information technology and telecommunications, reacting to laws passed by the U.S. Senate on Jan. 22.

Shourie said the U.S. law against business process outsourcing (BPO) to India and other countries would ”worsen prospects for multilateral negotiations in trade”.

”This sends out wrong signals at a time when the U.S. and India are working with others to lower trade barriers and establish fair trade rules,” said Arun Jaitley, India’s minister for commerce and industry.

The irony of the situation was brought out by Indian information technology leaders at the at just-finished World Economic Forum (WEF) held at the winter resort of Davos, Switzerland between Jan. 21-25, which brought together political, government and business leaders.

Said Nandan Nilekani, chief of the Indian IT major ‘Infosys’ at a workshop on outsourcing at Davos: ”You asked us to liberalise our economies, you preached the virtues of globalisation, you invented the business practice of outsourcing. We merely followed your advice and used the tools that you gave us.”

Only two percent of India’s 17 billion dollar information technology market is likely to be affected by the new law, but business leaders are aghast at the trend that they say smacks of unfairness.

”Such decisions do not help the free-trade policy envisaged by the WTO,” said Ramalinga Raju, chairman of Satyam Computers, an Indian company listed on the New York Stock Exchange.

In a statement, the Confederation of Indian Industry (CII) said that ”such anti-liberalisation measures when adopted by developed countries, particularly the U.S., would lead to greater protectionism and impact global trade flow.

CII pointed out in the statement that the U.S. government pressured India to accede to ‘Singapore Issues’ in the WTO negotiations that includes giving no favours to domestic suppliers, but has now gone back on its own stand.

In a draft report on the situation, the U.N. Conference on Trade and Development (UNCTAD) has advised India to take a lead in challenging the restrictions on BPO under provisions within the framework of multilateral trade negotiations.

”India should take the initiative to see that legal restrictions placed on outsourcing are brought within the coverage of GATS (General Agreement on Trade in Services),” the UNCTAD report said.

Shourie said he believed the new law now adopted by eight U.S. states was a shortsighted move enacted in an election year in the United States- and one that would hurt the U.S. economy more than any other country.

The minister said he expected opposition to the law from affected firms in the United States that ”avail of our services as they must know the consequences to their competitiveness if they are not allowed to outsource.

Citing published studies on BPO, Shourie said that over the last five years the U.S. economy gained more than 50 billion dollars by outsourcing to India and other countries.

BPO work at first covered low-end, back-office operations for transnational companies like British Airways and Lufthansa, which found it cheaper to have their accounting work done in their Indian offices. But this later grew to include software giants such as Microsoft.

Several Indian IT majors, including Infosys, Wipro and Satyam, have entered the business of taking on contracts for large multinational firms and sometimes subcontracts of U.S. government jobs farmed out to them. All three say they have not been hit by the new U.S. law but are worried by the trend that may catch on to European markets.

According to an alliance of software companies, the BPO industry now employs more than 200,000 personnel and projected to give employment to two million people in India in the next five years.

The United States is not the only western country worried by outsourcing to India. The National Rail Network in Britain gets work done in India and so do banks like Hong and Shanghai Bank Aviva and Prudential.

Last year Britain lost 8,500 jobs to India and some projections say the figure could reach 200,000 in the next five years.

According to the Confederation of British Industry (CBI), 43 percent of British companies are considering relocating their head office functions to India and there are fears that Britain may in the long run lose even the skills required to run offices.

India’s Prime Minister Atal Bihari Vajpayee has argued that the phenomenon of BPO was the direct result of the United States and other western countries cutting back on visas and work permits for professionals.

”You can’t have it both ways. In the absence of liberal visa and work permit regimes, outsourcing is inevitable because professionals in India and other countries are highly competitive,” he said at a recent meeting here of information technology investors.

Excerpt: