India hits back on outsourcing job fears

By John Ribeiro

IDG News Service(Bangalore bureau)

The Indian government went on the offensive last week on the contentious issue of the loss of U.S. and European jobs to India due to outsourcing.

Offshore outsourcing from the U.S. and Europe to India is the result of barriers to free movement of Indian professionals to these countries, Indian prime minister Atal Bihari Vajpayee told a business summit of the European Union (E.U.) and India on Saturday in Delhi.

“The demographic profile of Europe and America necessarily means that these countries will need the induction of a younger work force from outside in the coming decades,” said Vajpayee who added that if there was a more liberal regime for the free movement of businessmen and professionals from India to these countries, this demand for workers could be met within these countries.

“In the absence of such a liberal regime, outsourcing is inevitable,” added Vajpayee. “If people cannot go to where the business is, business will eventually come to where the people are.”

Vajpayee’s remarks come in the wake of growing protest from workers’ unions in the U.S. and Europe against offshore outsourcing of software development and business process outsourcing (BPO) to India. A number of states in the U.S. are also considering bills that will prevent suppliers to state governments from using foreign workers.

The Indiana Department of Workforce Development (DWD) recently canceled a contract with the U.S. subsidiary of Tata Consultancy Services, a Mumbai-based software services provider, as part of a new program to give Indiana companies and workers a better chance to win Indiana state government contracts.

The emotive arguments about the migration of jobs to countries like India have missed basic points, including that outsourcing is increasing the competitiveness and global reach of European and American companies, according to Vajpayee.

“The resultant boost to the balance sheets and increased dividend payouts are very much in these countries,” said Vajpayee. “The increased profits are also ploughed back into these economies.”

Addressing the E.U.-India business summit on Friday, India’s external affairs minister, Yashwant Sinha also addressed the contentious offshore outsourcing issue.

“It is in the interest of the Western world to know that we are cheaper and better,” said Sinha. “It is our strength. The world has to recognize it and deal with it.”

The remarks on offshore outsourcing are the strongest so far by India’s government, and indicates that the Indian government is worried that protectionist measures in their main markets in the U.S. and Europe may affect India’s software and BPO companies, according to analysts.

Making a case for outsourcing, India’s National Association of Software and Services Companies (NASSCOM) in Delhi has in a report last month forecast that the U.S. will face a labour shortage of 5.6 million workers by 2010 due to slow population growth and an aging population. Global sourcing in the form of offshoring and immigration is imperative to fill this labour gap, and protectionism can cost the U.S. economy up to US$2 trillion, according to the report.

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