Indian It/ites Firms Remain Unfazed By Obama Tax Plans

The recent announcement made by the US President, Barack Obama to slash tax breaks for companies that ship jobs overseas have failed to daunt the spirit of the IT and ITeS service providers in India. SME IT firms engaged in the outsourcing sector continue to remain hopeful that the industry will grow as more companies seek their services to rationalise costs and become competitive. Research firm Gartner has also downplayed forecasts of any threat to the growth of the Indian outsourcing industry from Mr Obama’s tax plans. Still in safe zone Industry players as well as analysts hold a common view that the Indian IT and ITeS sector, including big as well as SME IT and ITeS firms, will remain largely unaffected, despite the anti-outsourcing rhetoric by Mr Obama.

“Companies in the US would find it more favourable to outsource work to low-cost locations such as India and the Philippines even at the expense of losing tax benefits since it would be cost-effective for their business. Therefore, there is no need to worry for SME IT and ITeS as well as outsourcing giants in India,” said A Bhattacharya, analyst at Cirrus, a small-sized research organisation in Kolkata. Furthermore, analysts and IT/ITeS players believe that greater inflow of outsourcing work from other emerging markets will help the sector grow rapidly. “With new markets realising the huge potential of the Indian outsourcing industry, the overall contribution for the sector will grow, which will further help in offsetting the adverse impact of tax breaks, should there be any,” said S Shah, director of Creative Infotech, a small-sized IT firm in Ahmedabad. The National Association of Software and Services Companies (NASSCOM) has also dismissed projections that warn of any major threat to the Indian outsourcing industry, stating that it is protectionism and not tax breaks, which is a major concern for the Indian IT sector.