Indian outsourcers prepare for US trade war

India’s outsourcers are girding their loins for a trade war with the US over Barack Obama’s attack on US companies who export jobs and hide profits overseas.

President Obama outlined a plan last month to encourage US firms – especially tech outfits – to stop spinning jobs overseas. The idea of “US jobs” being done by cheaper foreigners horrifies Americans. Except when it comes to nannies, gardeners, waiters etc.

The plan has already drawn fire from US tech companies, who complain that it will hobble development and ignores the fact that technology is a worldwide business.

Yesterday, India began its counterattack. Som Mittal, president of trade group Nasscom, told a meeting in Bangalore, India, that the US administration’s plans could spark retaliation from Delhi, if they started hurting India’s crucial outsourcing industry.

The Times of India said that Mittal warned that if the US followed through on its protectionist threats, "This war could get started off”.

"So, for us, it's important that we are sensitive during this period," Mittal said.

Mittal pointed that India was a big market for many American products – including defence equipment – so its government had plenty of screws it could turn if Obama follows through on its threats. The defence market could be particularly sensitive: India is looking to develop its own defence industry, while Washington would be even more aghast if it turned to the likes of China, Russia or even North Korea in preference to the US.

Obama’s sabre-rattling is just the latest problem to hit the India outsourcing industry. A surging rupee, combined with the West’s economic woes have put a brake on the industry’s surging growth, while the scandal at Satyam has cast a shadow over the whole industry.

However, Mittal said there were signs of recovery. “The future growth opportunity lies in newer geographies and domains," the Times of India reported. "The BPO sector will continue to see a 6.5 per cent increase in global spend, and in India the sector is expected to grow 15 per cent annually, down from its earlier pace of 30-35 per cent.”

Nasscom chairman Pramod Bhasin added that India’s tech firms were beginning to focus on their domestic market. “Seeing the opportunities in government, telecom and insurance sectors, service providers are increasingly focusing on the domestic market," he said.

"Companies have to create new operating and business models to tap into the domestic opportunity. This is a huge market.” ®