Obama’s Victory Keeps India’s IT Industry on its Toes

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By ambrosia sabrina | November 8, 2012 7:06 PM EST

Barack Obama's return to the White House after his tight-race victory against Mitt Romney on Tuesday has raised concerns in India's outsourcing industry.  

According to iGATE CEO Phaneesh Murthy, Obama's hawkish stance against outsourcing will have an adverse impact particularly on the nation's $100 billion IT services sector.

"Not the best news for India or the IT outsourcing industry. However, we need to understand how much of the election rhetoric continues into 2013 and that will determine the full implications to us," Murthy told CNBC TV18.

Job creation emerged as a top priority in the presidential campaign. In the run-up to the elections, Obama took a strong approach on the issue of outsourcing jobs overseas and announced a string of measures to award firms that create jobs within the country. Emerging markets like India and China found themselves smack in the middle of the presidential fight, particularly after Obama accused Republican challenger Romney of encouraging offshoring American jobs there. 

Amongst the metropolitan cities in the country, Bangalore may face the impact of Obama's second coming. Dubbed "Silicon City of India", Bangalore is a global hub for major IT companies and is home to several IT outsourcing firms like Infosys and Wipro, which have a strong presence in the US. 

The industry's apex body Nasscom said that Indian IT firms have increased their investment by ten times in US-based centres. This has indirectly created around 175,000 jobs in the US, which at one time found itself in the middle of a lacklustre economy and high unemployment rates.

Rising visa costs have impacted the employment prospects of Indians going there. Many firms had complained against rejections and visa delays. Even the Indian government was prompted to lobby against the US law that required doubling the fees for visa applications.

Analysts shared similar sentiments about the effect on India's IT industry, saying that many firms will find difficult to secure US visas for their staff during Obama's second term in Office, The Wall Street Journal (WSJ) reported.

"I don't think there will be significant changes in visa policy," Siddharth Pai, the India partner for U.S.-based technology advisory services firm Information Services Group, told WSJ.

Infosys had earlier faced allegations of misusing US visa programs. The company was accused of using short-term US business visas, instead of the required H1B1 permits, for Indian employees to carry out full-time onsite.  The lawsuit was eventually dismissed in favour of Infosys.

Despite the strong campaign against outsourcing, Infosys announced plans to step up hiring in the US, expecting to double its work force there. In realistic terms, the country is facing shortage of skilled technical employees, triggering the need for such workforce from India. 

Besides job creation, Indian IT companies have contributed $15 billion in taxes to the US in the past five years.

Other IT firms are also seeking to increase their offshore presence there. Many companies are seeking to branch out to other segments like consulting and enterprise solutions rather than software application and development.

"That is where Indian companies are hiring in the US," said former Infosys director T V Mohandas Pai, Rediff reported. "And, it will increase," he added.

While some IT firms are wary of the effects following Obama's win, others are optimistic about the growth of the industry in the US market.

"In the US, economic growth and employment growth is more muted than what we saw in June. However, the demand for IT service is holding out. The demand is not a bumper demand that was there a couple of years back. But it is reasonably strong," Azim Premji, Chairman of Wipro, told Business Standard.

Tata Consultancy Services MD and CEO N Chandrasekaran also projected strong growth and opportunities in India's technology industry.

"That (focus on economic activities) translates into significant opportunity for the technology sector because it will be central in creating jobs in the US, India and in other markets which are used as global delivery centres," Economic Times quoted him as saying. 

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