Outsourcing cramps

India has made much headway in tackling the outsourcing of services by American corporates.

Commerce and Information Technology Ministries have put together a well thought out plan to stop this campaign in US on signing of Business Process Outsourcing (BPO) contracts by multi-national corporations in India.

Information Technology enabled services have become a major avenue for job seeking young qualified cost-competitive Indian personnel. While young Indians continued to excel in providing these services, in the international arena, this competence has led to the latest drive.

US companies, have begun to outsource their call centre, computer programming and back-end services to India to cut costs, boost their profits and announce higher dividends to US investors.

And, through the out-sourcing of services, US have also pushed its products and other revenue-earning services into markets in developing countries including India. Overlooking all these economic advantages of technology driven outsourcing of services, an outright campaign has broken out in US in the run up to American Presidential elections.

Vajpayee government tried to stop several states in US from adopting legislations banning outsourcing of services by state-owned agencies. Even the Federal Government headed by George W Bush has decided to ban outsourcing of services by government agencies to destinations like India.

Now, a proposal is being considered by US Senate that prohibits sub-contracting of services by American companies to locations say in Gurgaon, Mumbai, Bangalore or Chennai. US Democrats have gone a step further and promised to come up with a bill that will restrict the freedom of their own companies from outsourcing services.

Both Republicans and Democrats have been vying to out-do each other in this to placate their voters sending very wrong signals world wide for a country which has been preaching liberalisation and opening up of markets.

The avowed reason for such a campaign and a clutch of bills is loss of jobs for American citizens. But this argument does not stand scrutiny of commercial jurisprudence given larger benefits being accrued to American economy. Similar arguments put forth by countries like India while opening up their economies were anyway brushed aside by the US with its money and muscle power.

Outsourcing is like import of textiles and other goods by US to further its economic interests and meet its domestic demand for goods and services. US Federal Reserve chief Allan Greenspan has taken the position that there was nothing wrong in outsourcing of services. Chairman of US President’scouncil of economists N.Gregory Mankiw has publicly stated that outsourcing is ?just a new way of doing international trade? and ?a good thing? for US economy.

Saner voices notwith-standing, both Republicans and Democrats continue to encash on the anti-outsourcing sentiment without explaining the larger economic benefits to their electorate, logic, reasoning and rationale behind BPOs.

During last week’svisit of U.S.Trade Representative Robert Zoellick, neither Brajesh Mishra nor Arun Jaitley could extract any assurance from Washington DC in putting a stop to this tirade.

In fact, Zoellick justified the BPO ban with the contention by linking it to ?high tariff? protection given to Indian industry and farmers. Zoellick, insiders say, has thrown enough hints to Indian leadership not to make this ban an issue internationally.

In case Government continues a complacent attitude, creation of jobs for skilled Indian techies in infotech-enabled services could well end as a pipe dream. And, this will also have a large impact on the economy, given the growing dependence of economic managers on services sector that is all set to post over 10 per cent growth in 2003-04.

Outsourcing: vital statistics
US companies reported higher profits ranging 10-42 per cent due to outsourcing of services owing to cost cuts.

About six lakh Indian technology professionals work in BPO units in the country

Major US companies like Bearing Point (3000), IBM (6000 in 14 Indian cities), EDS (1500 in seven locations), Texas Instruments and GE are chief employers of Indian professionals.

Jobs moved out of US after reduction in H1B visas to foreign professionals to 65,000 from earlier 195,000 in 2000.

Curbs on natural movement of people against principles of free trade in goods and services professed by US at forums like WTO.

Goldman Sachs claims an annual 300,000 – 500,000 high value technology jobs in US.