After a lengthy row over IT outsourcing, the US today has passed a law which bans companies from outsourcing to India and other countries to cut costs.
The legal measure was part of a $328 billion spending bill passed by the Senate.
Now, when the US government gives contracts to American firms, the firm cannot give subcontracts out of that to a source outside the United States. This includes countries like India, China, and Russia.
However, the US chambers of commerce and other business groups are concerned that the new law would undercut the competiveness of US companies compared with rivals overseas. This is something India warned the US about last year.
This could be particularly damaging to the Indian outsourcing industry which was looking to the US recovery to cool the present backlash against outsourcing.
The bill has not yet become law and the Indian software industry has targeted the bill. Indian software companies have said that the bill violates free trade.
Kiran Karnik, president of the National Association of Software and Service Companies (NASSCOM), said in a statement “Such a Bill is not in keeping with the increasing globalisation of trade, which benefits all countries, and is contrary to the spirit of free trade being promoted by the World Trade Organisation and long espoused by the United States."
"This move will cost them more, finally. I don't think this is a sustainable method of protecting jobs," he said.
Sources:
Indian tech firms look to US recovery
India warns US over outsourcing