Indian firms cheer NJ outsourcing bill deferment

Monday, 10 March 2003, 20:30 IST
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India's IT industry has heaved a sigh of relief on the deferment of a New Jersey bill seeking to ban outsourcing of government contracts overseas, particularly to countries like India.

NEW DELHI: Industry players feared the passage of the bill would have set a precedent for other U.S. states, casting a shadow over outsourcing, the trump card for India's technology sector. "We are happy that the bill has been put on hold," said Kiran Karnik, president of the National Association of Software and Service Companies (Nasscom), India's premier IT industry umbrella group. "There was lot of rethinking and reconciliation going on within the government and industry in the U.S. on the proposal to ban outsourcing of state government projects' to India," Karnik said. "The New Jersey Senate has realised that the bill would not be beneficial to the state and its citizens. We have been working with policy makers and industry associations in the U.S. to prevent the bill from being cleared." The New Jersey Senate had unanimously cleared a bill on December 16 last year preventing public enterprises in the state from outsourcing work, specifically to India. Senator Shirley Turner had proposed the bill. The bill prohibits public enterprises from shifting their call centres abroad for "cheap labour" with a view to creating more jobs for Americans as the unemployment rate in the U.S. soars. The bill was taken up for discussion by the Senate Committee last week but couldn't be passed and has now been put on hold. The bill is now likely to be discussed in Senate again in May. Industry sources say the new bill may exclude India from the list of countries which will be prevented from entering into outsourcing contracts with public enterprises in New Jersey. The U.S. state legislative procedure requires a bill to be approved by the Senate committee before being referred to the Upper House for approval. If approved, it is sent to the governor. The bill becomes law after being cleared by the governor. "The bill has been put on the hold but it is not the end of the story. The passage of the bill would not be in the interest of the U.S. businesses," said Karnik. Indian industry players say the passage of the bill would have encouraged other U.S. states to adopt legislation to protect jobs, badly affecting India's booming technology outsourcing business in the long run. "The passage of the bill would have seen many state governments in the U.S. and eventually the federal government going in for protectionist legislation," said the marketing manager of a leading New Delhi-based technology solutions provider. And it had already started working. Close on the heels of introduction of the bill in New Jersey Senate, four other states in the U.S. were mulling a ban on outsourcing contracts to India. According to reports, the state of Missouri, Maryland, Wisconsin and Connecticut are contemplating legislation that will prohibit outsourcing of federal BPO works to countries like India. The state legislature in Washington is also reportedly considering a bill that will make outsourcing difficult with a view to reduce lay-offs in corporate America. India's vast pool of English-speaking and cheaper manpower, educational system and training programmes have helped transform the country into a global outsourcing superpower in the last few years. India's software exports grew by 29 percent to $7.5 billion in the past year to March 31, 2002, of which some 60 percent went to the U.S. The country's rapidly growing business process outsourcing (BPO) industry has virtually turned it into an electronic housekeeper to the world, taking care of a host of routine activities for multinational giants. More than a quarter of Fortune 500 companies such as General Electrics, American Express, British Airways, HSBC and Citibank are shifting their back office operations to India. British Telecom Group Plc (BT), Britain's largest fixed-line telecom services provider, said Friday its BT retail unit would set up two call centres in India - one in New Delhi and the second in Bangalore - to cut costs. The BPO industry in India depends to a large extent on the U.S. These jobs are mainly coming to India, as it is much cheaper to process activities such as human resources, finance and accounting, supply chain management and customer care here. "Any law disabling customer-service efficiencies definitely impacts businesses. So we are glad that the bill has been postponed. It comes as a great relief to us," said an official of a technology solutions company. "The bill was certainly not respecting the principles of free trade," the official said
Source: IANS