India outsourcers nonplussed by U.S. Senate restrictions

A bill recently passed by the U.S. Senate restricting federal government contractors from outsourcing work overseas is unlikely to have a significant impact on India’s software and services companies, according to an executive of the National Association of Software and Service Companies (NASSCOM) in Delhi, India.

The U.S. Senate passed an omnibus appropriations bill totaling US$328 billion on Jan. 22, containing provisions that restrict government contractors from outsourcing work overseas — commonly know as offshoring.

“The business impact of such a move on the Indian IT industry will be very small, as the share of U.S. federal government contracts in exports of IT software and services from India is less than two per cent,” said Kiran Karnik, president of NASSCOM. However, the bill is not in keeping with the increasing globalization of trade, which benefits all countries and is contrary to the spirit of free trade being promoted by the World Trade Organization, he said.

The restriction on outsourcing proposed by the bill affects only the departments of treasury and transportation and related government agencies, according to analysts. The restriction is valid only to Sept. 30, these analysts added, although they warned that in the run-up to elections in the U.S., similar and stronger legislation is likely.

A number of states in the U.S. are also considering bills restricting where work outsourced by the state government can be done.

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