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Indian PM: Outsourcing helps US companies

Any US restrictions on outsourcing from India and other countries would hurt American corporations, India's prime minister said on Saturday.

india Updated: May 09, 2009 18:49 IST

Any US restrictions on outsourcing from India and other countries would hurt American corporations, India's prime minister said on Saturday.

Prime Minister Manmohan Singh was reacting to President Barack Obama's recent statement promising to crack down on companies "that ship jobs overseas" and duck US taxes with offshore havens. "It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York," Obama said earlier this week.

Dubbed the Silicon Valley of India, Bangalore and its environs account for a third of India's software services exports. India's information technology firms derive 40 percent of their global revenues from financial services clients, with 61 percent of total sales from the United States and 30 percent from Europe, according to India's National Council of Applied Economic Research.

On Saturday, the Indian prime minister said that "governments take certain postures, but they learn very fast." "There are I think several US corporations who have been representing to US Congress that these artificial restrictions on outsourcing from India and other countries would in fact hurt the competitiveness of the US corporations themselves," he told reporters during a visit to the southern city of Chennai. He said that access to cheaper facilities in India helped US companies compete with their rivals.

"I am confident that in not very distant future, the US government would recognize this reality," Singh said. Cisco Systems Inc., the world's largest maker of computer networking gear, has moved aggressively into India, investing more than $1.2 billion since 2005. The company plans to make Bangalore, India's outsourcing hub, its second global headquarters, after the United States.

Also, IBM is the leader in India's domestic market, though Tata Consultancy Services, India's largest outsourcing firm by revenues, also has a strong presence.