India Inc not worried over 'chop shop' remark

The Indian industry seems confident on the latest bit of political rhetoric from the United States on the outsourcing of work and jobs from there, culminating in a reported statement from President Barack Obama on the process being reversed.

On the heels of a leading US Senator describing Infosys as a 'chop shop' for American jobs, news agencies had quoted Obama at a party fund-raising programme as saying the jobs and industries of the future weren't going to Germany or China or India, but would be back with America.

Taken with earlier comments on the need to act against the outsourcing of processes and jobs to places such as India, some read it as another whetting of the sword against Indian benefits from the process — our Rs 2.3-lakh crore information technology industry, for instance, earns more than 60 per cent of its annual business from the US.

Add the fact that the US economy is still in slowdown mode and that it is going to face a rancorous mid-term election in months.

Nevertheless, Indian industry feels the US president has not issued any red signal on the march of our IT industry.

"President Obama has made a good statement about the US competing with India and China and to create jobs in the US. He wants made-in-US to dominate and this is about manufacturing, not outsourcing," said Som Mittal, president of Nasscom, the apex IT industry association.

Ganesh Natarajan, former chairman of Nasscom and chief executive officer of Zensar Technologies, said the remarks are more of rhetoric, with mid-term elections round the corner.

"As an industry, we are watchful about any policy changes. But these comments seem more directional in nature. I do not think the US government can act on these statements," he said.

Nishant Verma, managing director of Tholons Capital, which advises Indian companies on outsourcing, said the commercial motivation to send these (US) jobs to other regions remains and will continue.

Agreeing, a senior executive from ABC Consultants noted numerous US companies have back-office operations in Indian cities such as Mumbai, Pune, Bangalore, Chennai and Hyderabad. These companies have not only made significant investments in India but are also looking at increasing their staff here, he said. "Before the US takes any step in this regard, it will have to think hard about (the effect on) its own corporate world."

And, experts with the pharmaceutical industry said the US would not be able to bring its healthcare costs down without the help of Indian generic companies, which contribute over 40 per cent of generic drug needs in the US.

"US drug multinationals are closing their manufacturing facilities and moving production to countries like India to save costs. It is not viable for US drug corporations to create manufacturing units in the US," said Ajit Kamath, chairman and managing director of Arch Pharmalabs, a major supplier of active ingredients to US drug companies. 

"The US would imperil itself by blocking movement of talent to its shores. More than hurting the Indian firms, this will hurt the US multi-nationals: the US would lose the advantage of being a country where free movement of expertise happens," said K Pandia Rajan, founder of Ma Foi Management Consultants.

There is a big issue, noted many, on the availability of skills within the US and its utilisation. One sequel has been the surge in the Indian population working in the US, from 1.6 million in 2000 to 2.5 million in 2007, making it the fastest growing ethnic group there. The point is that this is also one with among the highest proportion of educational qualifications and skills.

Quite a few say one should appreciate the Obama administration's stress on making the US more competitive by focusing on education and trying to create skilled jobs. And, that it is well aware of the pitfalls in blocking the movement of skills and expertise.