US fears about India's IT, ITeS unfounded
By siliconindia staff writer   |   Wednesday, 12 November 2003, 20:30 IST
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BANGALORE: The falling dollar and job losses are key concerns in the US these days. Economic troubles in the US have led to some unwelcome consequences for the Third World. There are demands on China to devalue and there are protests against India's burgeoning IT-enabled services business. Trade unions have been complaining that manufacturing jobs are being lost to China and services jobs to India. However, comparing USA's position in manufacturing and services, it may be that protests against India's IT and ITeS industry are less warranted. Consider the US figures for export and import of goods versus services. The rising current account deficit is on account of trade in goods, where the US runs a huge deficit. It actually runs a decent surplus on the services account. For the period January-August 2003, the US had a deficit of $364 billion in trade in goods, while its exports of services exceeded imports by $39 billion. The deficit on the goods account has rocketed in recent times. This is the reason for problems of the US current account and the pressure on the dollar to depreciate. The surplus on the services account has shown some contraction in the last two years. However, that may have been because of temporary causes, largely 9/11 and US policies thereafter. For example, one sub-section of the services account is travel. Here again, the United States runs a surplus with the world, presumably more tourists going to US than vice versa. This surplus has halved in two years. For January-August 2003, it was $5.2 billion compared to $10 billion in January-August '01. The strict US visa policies post 9/11 could account for this. Military adventures are also hurting the services account. In January-August '03, US had a deficit of $7.6 billion, compared to a negligible deficit of $0.8 billion during January-August 2001. These are the two sub-sections, which practically explain all fall in the services account. The US services surplus has grown in two key sub-sections, royalty and licence fees, and 'other private services', which could include consulting and its own IT services exports. India's exports of IT and ITeS services would be classified under the head 'other private services', where USA's balance with the world is actually is growing. (Source: Economic Times)

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