Recent pronouncement by the Ohio State Governor Mr.Ted Strickland ordering a ban on outsourcing government projects to companies outside the US and subsequent announcements by the US President that tax breaks should go only to companies that create jobs in the US and not overseas have raised concerns among the IT fraternity and have invited strong reactions from the Indian IT companies as well as from some quarters in the Indian government. These steps followed similar restricting actions earlier like increasing the visa fee for H1 and L1 Visas has added to the concerns of the Indian IT industry. The fact that the US government might have been forced by their own local compulsions like a faltering economy, high unemployment levels along with other political factors has not been a source of solace for the IT industry barons in India.
Indian IT industry has grown considerably over the last two decades and has become a significant contributor to the national GDP with 5.5% coming from the IT and ITeS sectors. 2 million people are directly employed by the $70 billion IT sector with another 7-8 million being employed indirectly. UK and US continue to be the major market for the Indian IT Companies with 61% of the revenue coming from the US, 18% from the UK and the rest from other European countries. Thus, outsourcing is the lifeline for the majority of our IT Companies and hence they are naturally in the forefront of the ongoing outcry against the ban imposed on the outsourcing. The NASSCOM head has been very prompt in pointing out that the IT companies were always been supportive of free trade and open market policies (it is another matter that in many instances these policies have been detrimental to our own economic and national interests). The Indian IT Company’s representative body had no hesitation in calling the action as ‘discriminatory’ trade barrier. However, besides the perspective from a narrow business interest of the Indian IT Companies, the issue of outsourcing needs wider examination from a broader perspective to evolve the appropriate response towards the ban imposed.
One of the triggers for the Ohio Governor’s order was the public outcry following a revelation about a call center services for a federally funded program being outsourced to El Salvador. The program, which was funded by the US government's $780 billion stimulus package (The package released by the US federal govt to help their economy recover from recession and to bail out banks, create employment, boost consumer spending etc), was to provide tax rebate to consumers who purchase energy efficient appliances. Ohio State contracted the project to a Texas based company Perago Inc. This company then outsourced the call center connected with this program to El Salvador. This was in fact discovered by a citizen (not the state) and caused a public outcry against the impropriety of siphoning out the public money, targeted for stimulating local economy and create jobs, by corporate to make profit for themselves. So, the irony was that a program which was designed to generate jobs and stimulate economy locally ended up creating jobs in El Salvador instead of Ohio because of the greed of the contracting company to increase their profit. A program designed to help people out of recession by pumping tax payer's money was ironically taking the jobs away! The situation naturally prompted the state government to act to remedy the situation. Will it be appropriate to condemn this decision of Ohio state government?
‘Outsourcing ban’ per se thus is not something that needs to be objected. Should we be asking US to encourage outsourcing? Should we be arguing that US should uphold India’s interest above own interest? Should we be aligning with the US corporate who in their greed to farther their huge level of profits outsource work to each and every corner of the world wherever cheap labor is available, completely ignoring the local people’s interest and growing unemployment? Answer to all these questions should be in the negative. We should respect Ohio State’s right to ban outsourcing to protect local employment and US government’s decision to withdraw any tax concessions to the companies who take job elsewhere in pursuit of higher profit via cheaper labor. However, it should be pointed out in the same vein that the US is preaching the whole world to abstain from these very protectionist actions that they are currently indulging in to protect their jobs and economy. The current ban brings out this contradiction all the more glaringly once again to the utmost discomfort of the free market apostles!
It is important for us not to miss the fact that the ban is clearly another example of the double standard that the US time and again pursues in the matters of ‘free market’ and ‘free trade’. As numerous other incidents and instances have repeatedly demonstrated, US’s preach on free market lasts only as long as it suits their interests and whenever it doesn’t, they have no inhibitions to employ trade restrictions and protectionism to safeguard it. It is very ironical that while the US President on one side argues for protecting US jobs and economy by banning the outsourcing, in the same breath, he demands India to open up the market for the American farm products imports. While he is loud and clear to stress on US’s right in protecting employment in the US, he turns a blind eye when it comes to appreciating India’s right to act in the interest of her farmers. Wish the Indian policymakers can see through the scheme and learn from it instead of blindly jumping on the globalization bandwagon and surrendering the nation’s interest to the global corporate in the name of ‘liberalization’.
The irony once again is highlighted by the fact that the US is a member of GPA (Agreement on Government Procurement), which is an agreement under WTO for setting fair rules for public purchases. The fact that the US while advocating such an agreement to other countries is violating the very spirit of it by relying on such protectionist measures helps only to expose once again the double talk they indulge in. US wants India to open up every conceivable markets, including insurance, banking, retail, media, services, nuclear etc but doesn’t want to open up own backyard for the Indian IT Companies speak volumes of the hollowness of US’s preaching on the free market and free trade. Apostle of free market has to turn to the methods of government intervention to control the market forces once again demonstrates the failure of open market policies to work for the welfare of the people. Current ban on outsourcing should make all the developing nations to open their eyes to the dangers of unilaterally submitting their national interest to the forces of the west lured by the hollow promises of globalization and free market capitalism! .
India government and Indian IT Companies have valuable lessons as take away from these developments. Indian IT sector has been overly relying on the US and European markets for too long. For example, 98.2% of Infosys revenue comes from outside with US accounting for 62.6%, Europe 26.8 and rest of the world 8.8%. The domestic share lay at a paltry 1.8%! Apart from diversifying the market to other parts of the world, it is also critical that the Indian IT Companies start increasingly looking to cater to the domestic market more seriously instead of continuing to heavily rely on outsourced projects from outside. May be time to start another self-reliance movement, this time for indigenous software?
Suresh Kodoor
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