Before we look into how US outsourcing has affected India, and how it is about to change, its important to understand this relationship in depth. In the late 1980s, India (Gurgaon) was home to the back office operations of American Express (JAPAC) and was called Financial Resource Centre East. G.E. Capital, Mr. Karnik writes in his book, The Coalition of Competitors, was the first company that had outsourced software related work to India. This was, perhaps the starting point of modern outsourcing to India-in-general. Companies such as IBM, Oracle, Orcim Soft, Inc., etc., and international banks such as CITIBANK, GE Capital, JP Morgan and more have now outsourced many of their services as well as products to India. And why wont they? As Thomas Friedman mentioned in his NY Times article “ The Great Indian Dream,” by outsourcing U.S. corporations have saved between 30% -70% of their labor costs.
It is important to understand that the economic policies that enabled this growth was India’s gradual liberalization of telecommunication and equipment manufacturing sectors, which led to more involvement of the private sector. In addition it was also US president, George H. W. Bush, who opened the U.S. market to India.
The US Congress, in December, passed the 9/11 Health and Compensation Act bill to fund healthcare for first-responders. The bill has doubled the fee for every new H-1B visa applicant to $4000. According to NASSCOM, for the next 10 years this change could cost the Indian IT Industry $400 million per year.
So what would outsourcing to India look like if Trump were to be elected?
Trump, President – 2017:
Trump’s government will be employing large tariff taxes on all of America’s largest trade associates. In an interview with The New York Times, he said “every car and every truck and every part manufactured in their plants that come across their border, we’re going to charge you a 35% tax.” This he had intended for Mexico, however, high tariff taxes, and the large barriers would extend to India and the parts of car that are also manufactured and sent to US. According to Reserve Bank of India, In march 2015, India’s software services have accounted for $ 82 Billion worth of exports, of which 60% came from North America alone.
Donald Trump during his campaign has shifted his views several times on the H-1B program. He had initially criticized the program for providing IT jobs, mainly entry level positions, to workers from countries that provided cheaper labor. He further propositioned a restriction on the program. However, he stated, during the Third Republican Debate, that the growing number of H-1B visa holders has enabled the loss of talented American people. Post debate he reversed his claims stating that he absolutely does not support H-1B visas and that he wants to, and would “end forever” the usage of H-1B workers, which would allow the recruitment for more American employers. Tata Consultancy Services (TCS) and Infosys, the Indian outsourcing monarchs, are heavy users of the H-1B visas. The IT industry’s concerns are rising as Trump is constantly shifting his positions on the H-1B program. This also concerns what outsourcing would look like once Trump is elected.
According to South Asia Expert, Sumit Ganguly , “[Trump] is a man who knows nothing about foreign policy. Trump wants to withdraw America from the world. His foreign policy is incoherent and bereft of meaningful ideas.” Ganguly says this that after the report from The Washigton Post disclosed Trump’s plans to “significantly diminish” the involvement of US in NATO, where he argued that in order to cease China’s military airfields, US needed to threaten China’s access to its markets.
Most of the remarks about international trade made by Trump focused on Mexico and China, and were devoid of directly talking about India. With the recent speech, where he imitated the Indian accent, he showed that he does not approve of outsourcing BPO jobs to India. However, he did not make any strong claim at the speech. It is hard to judge Trump’s position on outsourcing to India. On one hand, is planning change the H-1B program through which many of the jobs provided to the IT sector would be cut short. On the other hand, he has not made any specific and strong comments relating to India.
Let’s see what outsourcing would look like with Hillary as the President.
Hillary, President – 2017:
Hillary’s “ Make it in America,” wants to ensure that U.S becomes a manufacturing leader. Hillary’s “Make it in America,” will ensure that the corporations that are participating in her strategy, will have to make a pledge. A pledge that will enable the American corporations to keep their businesses in the US, making sure that the investments and productions are not outsourced to other countries.
Hillary’s government will make sure that if any of the new trade agreements that will be employed do not meet her high standards, she will put a hold on the agreement. All of the new agreements must make sure that they will create new jobs, raise the overall wages and invest in the improvement of the national security of America. She has already opposed the trans-Pacific Partnership as she considered the agreement to contain currency manipulation and weakened rules of origin standard.
Hillary’s government is also planning to cut down the special tax breaks that help ship jobs overseas and in outsourcing, in order to collect the proceedings and re-invest it in American corporations and manufacturing companies. She is planning to enforce an “exit tax” on the businesses that depart from the American market so as to lower their own taxes.
Hillary in her speech in India, stated that the economic relationships among the two countries have been important to US in terms of economic growth. However, right now, she stands at a point where she, if not openly, denounces outsourcing in general. The “Make it in America” will guarantee more entry-level jobs to the American citizens. But she doesn’t openly discuss at what cost, or how this will affect the American citizens in future.
In conclusion, although there is no clarity to which political party would help outsourcing to India, the present U.S. government continues to outsource IT jobs to India. According to the Economic Times, Chicago based Tribune Publishing Company has started to shift its IT work to India based Tata Consultancy Services. McClatchy, which owns newspapers like The Miami Herald and Sacramento Bee, will be outsourcing to Wipro, another Indian IT company