Sunday, February 14, 2010

Obama Targets Outsourcers (US versus India)

After months of silence, US President Barack Obama once again woke up from his slumber and said something that many perceive to bring some radical changes in US outsourcing policy and its impact on developing countries like India (!!!) in particular.

In an interview to the business magazine Bloomberg Business Week, Obama said about the outsourcers outsourcing their work to India, "If you are a business here, entirely located in the US, and investing in the US, and hiring workers in the US, you are paying a 35 percent rate; however,if you are a multinational and you are investing in India, and your workforce is in India, and your plants and equipment are in India, but your headquarters are here, you are taking deductions on all the expenses in India, but you are keeping your profits outside the US; and that just doesn't seem entirely fair," he argued.

He further added "The same is true where you have companies that have 90 percent of their sales in the US, but are posting 90 percent of their profits overseas.  You get a sense there that the accountants have been busy."  Thus, probably starting a debate of sorts about the companies who are pro-business and anti-business to US economy.  According to him, US companies that are working in US, have a US workforce, have made investments in US, and are paying due taxes to the US are pro-business, while the other companies (primarily outsourcers) are somehow anti-business.  Now, that is something that is open to debate and I am sure a lot of reaction from across the globe (and especially India) will soon start to follow about this pro-business and ant-business model.  Indians might sense some far-fetching consequences if this means some outsourcing policy changes by the US government in the coming year where the outsourcing companies will be liable to pay a certain percentage of tax (and I guess that may be a big chunk) to the US and thus will have to compensate that with cost-cutting measures in their Indian business while still keeping their profit level same or higher, that means a win-win situation for Obama where he will be hailed as pro-US people while still allowing outsourcers to outsource work to India and still getting a big chunk of money coming back to US in terms of taxes; but, what it means for Indians, well what I perceive, bigger salary cuts, more pink slips, and probably lesser job opportunities.  Well, let's not be so negative in our thoughts, but still  things are concerning and the statement coming from Obama just in the first quarter of the year may give sleepless nights to thousands of Indians working for these outsourcing companies.  Just wait and watch with bated breath what happens next!!!

© 2010 Ranjan Kumar

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