New US President Donald Trump’s ‘America First’ pledge, and his subsequent curbs on immigrants, have rattled India’s software services sector, for whom the US market accounts for 60% of its exports. Companies are closely watching how the new US government intends to deal with outsourcing of jobs and whether it will enact protectionist measures.
Having won the presidency on the promise of protecting US jobs and bringing them back onshore, Trump has been warning big companies – such as Ford and Carrier – to cancel factory plans in Mexico and shift them home instead. He has also extracted promises from computer giant Apple and its supplier Foxconn, as well as the online retailer Amazon, to generate up to 150,000 American jobs.
All this comes with India’s software services sector already battling slow growth following Britain’s exit from the European Union and shifts in spending to newer areas such as digital and cloud. Market leaders such as Infosys and Wipro are treading with caution and have trimmed their outlook for the fiscal year ahead.
Trump’s recent order to block entry of people, including highly qualified professionals, from seven Muslim-majority nations has upset the US information technology industry, some of whom have criticised the measures as immoral and un-American.
Google CEO Sundar Pichai has expressed concern about the order in general and its implication on his employees in particular. Google apparently recalled all employees potentially impacted who were abroad at the time, in an effort to get them back in the US before the order took effect. As per Pichai’s memo, nearly 187 employees could be affected by the order.
In India, meanwhile, analysts see the Trump order against Muslim countries as one of the measures leading to a US retreat from globalization, a retreat which will have a strong impact on globalized sectors like IT.
India’s software lobby group, the National Association of Software and Services Companies (NASSCOM) has asked IT giants in America such as Apple, Google, Microsoft and IBM to lobby Trump and explain to him that more jobs would be generated by US companies if they were able to outsource to India.
The Indian government also plans an outreach program over the next few weeks to showcase the role of India’s technology sector in making the US economy more competitive and to highlight its contribution in terms of jobs created locally and billions of dollars paid in taxes.
The recent telephone conversation Trump had with Indian Prime Minister Narendra Modi was viewed as a sign of continuing of close ties between two countries. Analysts felt there would be no adverse impact on the Indian IT, biotechnology and pharmaceutical industries.
It may be recalled that Trump’s predecessor Barack Obama also took certain measures to discourage outsourcing of jobs overseas. During his 2008 election campaign he came up with the slogan “Say no to Bangalore and yes to Buffalo”. After becoming president he stopped tax incentives to US companies that create jobs overseas, while offering incentives to those creating jobs at home.
That did not have much impact on the IT services sector, however. This time, too, industry watchers hope US IT companies can prevail upon their country’s administration to shun protectionism in favor of pragmatism.