The Hindu Business Line : India irked at `protectionist' US law on IT outsourcing

INDIA today told the US in no unmistakable terms that the reported legislation in certain US States against outsourcing of US government contracts in the information technology (IT) sector was "protectionist".

This was conveyed to the visiting US Congressional delegation comprising representatives from New York, Texas and Florida who called on the Union Commerce and Industry Minister, Mr Arun Jaitley here.

The Congressional delegations consisted of Mr Joseph Croley, Ms Sheila Jacknson-Lee, Mr Chris Bell and Mr Kendrick B. Meek. The US Ambassador to India, Mr Robert Blackwill, was also present, besides the Commerce Secretary, Mr Dipak Chatterjee.

The discussions covered bilateral trade and investment, with the US delegation underscoring the scope for greater investments into India.

On the issue of the reported legislation in certain US States such as New Jersey against outsourcing of US government contracts in the IT sector, Mr Jaitley said that it was an issue of market access, whose importance lay not so much in the limited impact it might have in the short-run as in the strong protectionist signals it gave out. It was also pointed out to the Congressional Delegation that outsourcing offered numerous economic advantages by helping the US firms to reduce their cost overheads and to improve their own competitiveness, as India offered marked competitive advantages that had led to its emergence as an attractive source for high-quality- low-cost back office solutions.

Pointing out that India is perceived as a lucrative investment destination, Mr Jaitley said that compared to other investment destinations, India had one of the most liberal FDI equity cap regimes. On bilateral trade, while responding to the concern expressed by the US side over the widening trade gap due to the persistent trade surplus in favour of New Delhi, Mr Jaitley said that the sustained increase in India's exports to the US was a reflection of the growing competitiveness of Indian goods and services. It was also mentioned that while India's exports to the US continued to increase, India's imports from the US were also growing appreciably during the first two months of the current calendar year, underlining the US position as the country's major trading partner.

In the area of FDI regime, the US delegation sought improved enforceability of contracts in the event of breach involving damages. The Minister said that the issue of enforceability applied not only to foreign investment but domestic investment as well and said this legal issue was being looked into. The US delegation also referred to the need for promoting partnership between the small and medium enterprises of the two countries.

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