Economist urges Indian Prime Minister to address outsourcing with Obama

An economist wants Indian Prime Minister Narendra Modi to confront the US government’s stance against outsourcing because of public resentment

A prominent economist wants the Indian Prime Minister, Narendra Modi, to discuss the US government’s public stance against outsourcing because it is building sentiment against India.

Indian born Jagdish Bhagwati – now a naturalised US citizen – is an economics and law professor at Columbia University in New York.

He told an audience at The Economic Times Global Business Summit in New Delhi that US leaders talk about outsourcing in a negative way, and it has become a term to describe Indians taking US jobs.

According to the Times of India he said: "When president Obama comes here, since we are thinking of exporting, Modi has got to take up outsourcing with him.”

He said that, because the US president, senior politicians and many of the public have taken a stance against outsourcing – which he said has become a code word for importing from India – the reputation and even safety of Indians is at risk. “If you keep saying outsourcing is bad, it builds sentiment against India. And, when people get attacked in the US, they say 'Ah, Indians are taking away jobs in the US'," said Bhagwati.

Rhetoric drums up votes

In the UK, offshoring IT has also become synonymous with exporting IT jobs to India.

In contrast, huge amounts of manufactured goods in the US and UK come from low-cost regions without the same negative connotations associated with them.

Immigration and employment are two big issues at election time and politicians often use anti-offshoring rhetoric to drum up support – and president Barack Obama is no exception. UK political parties also have take up a stance on IT offshoring, such is its scale.

Government rules

But the offshoring of IT to countries such as India has become a normal practice for large western companies, and is increasingly an option for mid-sized businesses as well. The offer of skilled IT and business process staff – at a quarter of the cost of onshore equivalent – is attractive to businesses, if government rules allow them to do it.

In the UK, intra company transfer (ICT) rules allow offshore companies with a UK office to bring offshore staff into the country. This is used as a loophole by suppliers that want to bring staff in without going through strict visa requirements.

There are thousands of IT workers in the UK on ICTs. Many are from low-cost countries, with India by far the biggest supplier. There are many more in India performing roles for UK businesses remotely.

Read more on Offshore IT services

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