Obama Is Indian IT Industry's Fear & Hope

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Will election rhetoric transform into ground reality? If so, the Indian outsourcing industry will soon feel the heat. Obama has returned to fulfill a second term on the promise that he will bring back jobs to the US by reducing or stopping outsourcing. And on being re-elected, he reiterated this promise by saying:

Tonight you voted for action, not politics as usual. You elected us to focus on your jobs, not ours. And in the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together.

Predictably, the Indian industry, including the $100 billion IT–BPO sector, is on tenterhooks as reflected in media reports:

• "Congratulations to the President for pulling off a hard fought victory. Not the best news for India or the outsourcing industry." -- Phaneesh Murthy, CEO, iGate
• "I am hopeful there will be more pragmatic approaches to some of the problems... I am hopeful that the US government will do the right thing."
  -- Kris Gopalakrishnan, executive co-chairman of Infosys
• "I think there will be greater implications as he (Obama) focuses on issues like unemployment. I just hope he remains true to free trade and all the other things that he talks about so well." -- Pramod Bhasin, vice chairman, Genpact
• "Every time there is the anti-outsourcing topic, we always take it as if it is for our industry (Indian IT services industry). Actually, it's targeted at the manufacturing sector. Many of the jobs (in the manufacturing sector in the US) have moved (to China). -- Som Mittal, President, NASSCOM

The National Association of Software and Services Companies (NASSCOM) has valiantly tried to alleviate fears with the argument that growth in the US will come only if American companies start growing, and that growth will require the help of the Indian industry. India can provide American companies with efficiency, innovation, and expansion into new geographic markets. NASSCOM has also pointed out that companies have been hiring more locals onsite in line with business requirements of getting close to the customer, most permanent jobs at these companies were held by US nationals, and the IT services industry has invested $5 billion in America.

The Indian government has also put its weight behind the industry's claimed credentials. Speaking at the World Economic Forum in India last week, Minister for Commerce and Industry Anand Sharma said statistics prove that while 280,000 jobs were outsourced from the US to India, 555,000 jobs were created in the US. In fact, "for every job outsourced, two higher-value jobs were created in the parent company."

Another major worry for the Indian IT sector is the restriction on H-1B visas and a high rejection rate for L-1 visa applications. Bombarded by continuous attempts to bring in legislation to regulate visas, impose visa fee hikes, and curb immigration, and faced with allegations of misuse of the L-1 visa, the industry has found solace in the report from the Partnership for a New American Economy.

The report says if the US does not reform its immigration laws to welcome workers who will continue America's success story, it will be faced with three major risks: a shortage of workers in innovation industries, a shortage of young workers, and slow rates of business startup and job creation. As jobs in science, technology, engineering, and math (STEM) increase three times faster than other jobs, there are not enough American students entering these fields.

Apparently, there are five times as many non-STEM graduates than STEM graduates in the US, and the growth rate of American students majoring in STEM fields is among the slowest of any category. Consequently, the US faces a projected shortfall of 230,000 qualified advanced-degree STEM workers by 2018.

In contrast, immigrants are more likely to be trained in STEM fields. In fact, about 60 percent of all foreign graduate students in the United States in 2010 were enrolled in science and engineering fields. Reason enough for NASSCOM to hope to be part of the economic solution that will return stability to the world economy?