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On U.S.-India Trade Relations
Outsourcing companies in India cheer President Bush on his reelection

By Saritha Rai

India’s outsourcing companies were jubilant on Nov. 3 that the elections in the United States will return President Bush to office.

“This is great news for the offshoring industry,” said Nandan M. Nilekani, chief executive of Infosys Technologies, a software services company. The trend toward outsourcing will now become even more inexorable, Nilekani said.

Offshore outsourcing, or the moving of work from the United States to low-cost regions like India, was an issue in the U.S. presidential election. The Democratic candidate, Sen. John Kerry, blamed Bush and offshoring for the loss of thousands of American jobs.

Bush, in contrast, was largely silent on the issue. But members of his team, among them N. Gregory Mankiw, the chief economic adviser, and Treasury Secretary John W. Snow, have both defended offshoring as another form of free trade.

Kerry referred to “Benedict Arnold companies and CEOs” that sent jobs overseas. He promised that as president he would end tax deferrals for companies that send work abroad.

The tone of some campaign comments criticizing outsourcing was noted with some concern in India. The Times of India, the country’s leading newspaper, called offshoring the “swear word” of the 2004 elections. Thousands of workers in India’s technology centers like Bangalore and Hyderabad closely followed the campaign. India’s outsourcing industry employs more than 800,000.

For more than a decade now, leading Indian outsourcing and software companies like Infosys Technologies and Wipro Technologies have written software applications and done back-office work for top American corporations, including General Electric and Citigroup.

The work can be done more cheaply in India, where skilled labor is inexpensive and plentiful. The leading outsourcing companies earn as much as two-thirds of their revenue from customers from the United States.

India’s software and back-office services industry posted $12.5 billion in export revenues in the year ended in March, a 30 percent rise over the previous year as global demand for its services grew.

News that Sen. Kerry had conceded the election to President Bush was greeted with joy in the industry. “We are very happy that Bush is back,” said Kiran S. Karnik, president of the industry group Nasscom, or National Association of Software and Service Companies.

“The president’s track record has been of recognizing the advantages of free trade,” Karnik said. Bush’s re-election will bring out the latent demand for outsourcing and lead to more offshoring announcements by companies, he said.

“Some corporations have been cautious about signing or announcing deals in the last few months,” he said, adding, “Now they will no longer hold back.”

Some executives said that offshoring would grow at even steeper rates with Bush’s victory.

“The elections are over and so is the rhetoric; it will be easier for American corporations to step out with their outsourcing plans,” said Vivek Paul, the vice chairman of Wipro, who works in Mountain View, Calif. The company itself is based in Bangalore.

In spite of some strong American sentiment against offshoring, Indian outsourcing companies have been growing robustly recently. In the quarter that ended in September, Infosys Technologies announced a 49 percent rise in profit, and added more than 5,000 employees.

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