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

US versus India: Earning versus Cost of Living

The once magic word NRI particularly US NRI is slowly losing its magical charm these days with rupees consistently getting stronger against US dollars and the continuing downward trend in US economy. In fact, if the trend continues to move the same way, the days are not too far where you will find a US techie drawing just the same salary as an Indian techie or to put it in another words a US techie will be earning as low as an Indian techie earns in India (that means US salary dipping and Indian salary rising).

SALARY:  Based on the data compiled by Manpower, take a look at the following startling revelations:

1. Sector's staff level salaries were as much as 86 per cent higher in the US compared to India in 2006. However, this gap declined to 82 per cent in 2007 and is expected to decline further to 78 per cent in 2008.

2. In the case of executive level salaries, the gap dropped from 68 per cent in 2006 to 60 per cent in 2007 and could further decline to 52 per cent this year.

3. The steepest decline of 21 per cent is likely to be seen in the middle manager level, where the US salaries used to be 69 per cent higher in 2006, but would be only 48 per cent higher than India in 2008. This difference stood at 57 per cent in 2007.

According to data compiled by Manpower, the average annual executive salaries in the US stood at $205,047 in 2006 and increased to $213,336 in 2007. In comparison, the Indian average annual salary is expected to rise from $65,356 to $103,167 in 2008.

For middle-manager level, the US average annual salary actually dropped from $104,681 in 2006 to $103,379 in 2007, while in India it rose from $32,733 in 2006 to $44,250 in 2007 and would further improve to $53,566 in 2008.

The Indian staff-level salary is expected to rise to $20,337 in 2008, from $13,156 in 2006 and $16,800 in 2007. In the US, the staff-level salary dropped from $92,201 in 2006 to $91,965 in 2007.

So, here we see a definite rise in Indian salary as compared to US salary.

COST OF LIVING:
1. Rent: Comparing the rent from a major US city like New York, Chicago, San Francisco, or LA to a major Indian city like Delhi, Bangalore, Chennai (except Mumbai), the rent difference will be as much as $700 (Rs. 35,000) where in a major city in an upmarket locality you will have to pay $600 to $1000 (Rs. 30,000-50,000) against a whooping $2000-2500 in a major US city.

2. Children Education: US definitely is much better than India because a public school in US is free, but in India the fee varies anywhere from $20 to $200 per month depending upon the choice of school.

3. Food: Of course, India much cheaper than US the savings in India can be as much as $300 to $500 a month.

4. Healthcare: Well, if you are fully covered in US, then its out of question, but if not, the healthcare in India is at least 25% cheaper than US.

5. Domestic Aide:  Undoubtedly, much cheaper in India, where in US, a single visit domestic maid takes anywhere from $25 to $50, in India for $50 you can get a domestic aide for a month.

Now, if you compare both these data together, I think its much less profitable becoming an NRI and better work in India and still make much better savings than US and enjoy the joy of living in your own country rather than some foreign land. In fact, if the trend continues, we might see a reversal trend and start seeing more of NRAs (non-resident Americans) in India rather than NRIs in US. Wat say guys???


© 2010 Ranjan Kumar