New US Job bill to impact Indian IT industry

According to rating agency Moody’s, Unites State Senate’s proposed ‘Bring Back Jobs Back to America’ bill will impact Indian IT workers adversely. As per Moody’s analysts, if the proposed bill is passed and becomes a law then Indian IT service industry will witness a decrease in the number of new contracts being signed and renewed. It is said that the proposed bill will hinder the growth of the industry in the long term.

Job Fairs are popular during a slow economy

Job Fairs are popular during a slow economy

Concern over outsourcing jobs from America to other countries is heating up with the presidential polls nearing in U.S.  Moreover, the war of words between the presidential nominees Obama and Mitt Romney is further spicing up the issue. The proposed bill suggests imposing tax penalties for the companies that outsource business process to offshore destination. In addition to it, the bill also proposes tax incentives up to 20% for the companies that bring back jobs to America. The companies will be able to cover up the cost associated with re-shoring jobs and give a thrust to the business activity with the proposed tax incentives.

As per the Moody’s analysts, the bill if it becomes law will reduce the demand for outsourcing services in the nation which will pose challenges for Indian IT service providers. US and UK market accounts for 60% of the overall revenue generated by the IT/BPO industry in India.  It is anticipated that the new proposed bill to bring back jobs to America coupled with economic uncertainties and new policy initiatives will bring down the demand for outsourcing in US.

However, there is some relief for the IT workers employed by companies like TCS who in terms of sales are the India’s largest IT services exporter. According to the rating agency, TCS will only have a limited impact by the proposed bill. It is said that the TCS’s A3 rating and strong operating performance is unlikely to be impacted by the bill. The company’s established brand and its competitive positioning in the market will help them to limit the affect of the proposed job act in US who accounts for 51% of the company’s revenue.

It is a threatening situation for the Indian IT industry and the employees with employee unions back in US also campaigning seeking more support for the proposed bill. This is not the first ever bill presented before the senate to curb outsourcing of jobs from US.  Earlier a bill was put before the senate to impose tax on overseas profit of US firms but authorities failed to pass the bill as law. It is forecasted that the new bill will turn to be beneficial for US based IT services providers Accenture and IBM who have a strong presence in US outsourcing market.

However, the Indian IT/BPO industry body NASSCOM is keeping mum on the much hyped bill leaving the IT workers and the industry as a whole getting panicky over their future.

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