Amid indications that outsourcing could become a hot issue in the November polls, President Barack Obama has made his stand on the issue clear, saying that tax breaks should go to companies that create jobs in the US and not overseas.

Obama comments came close on the heels of the Ohio state Governor passing an executive order to ban outsourcing, a development that has raised concerns in India that is often described as the world’s back office.

Significantly, Obama’s policy speech on economy came in Ohio itself, where he made clear his determination to end tax loopholes that provide incentives for investment in overseas jobs, saying he will provide a generous tax credit to companies that create more jobs in the US.

“One of the keys to job creation is to encourage companies to invest more in the United States.

Kamal Nath hits back, says outsourcing no favour by US

Road Transport Minister Kamal Nath has on Thursday said outsourcing is an economic issue and “in the end, it is not something… they (the US) are doing us a favour. The US companies, to remain competitive, must be able to outsource.” Despite these odds, the Indian IT firms would remain competitive, Nath – who had dealt with such issues as former Commerce Minister – said.

India will formally convey its disappointment to the US over the ban imposed by the state of Ohio on offshore outsourcing at the high-level bilateral Trade Policy Forum meeting in Washington later this month.

“It will be on the agenda. I will raise the issue at the TPF meeting there definitely,” Commerce and Industry Minister Anand Sharma said in New Delhi.

Sharma and US Trade Representative Ron Kirk will co-chair the September 21 meeting of the Trade Policy Forum (TPF), which is the principal trade dialogue between the United States and India.

While the Commerce and Industry Minister did not spell out specific concerns, sources said the Indian side would convey its “disappointment” over Ohio’s ban on offshore outsourcing by government departments.

Sources said India would not like to adopt a “confrontationist” stand ahead of President Barack Obama’s visit to India in November.

It is in this backdrop that conciliatory voices were heard from the Commerce Ministry, even though Commerce Secretary Rahul Khullar said on August 17 the H1B and L1 visa fee hike by the US was not WTO-compatible and India “cannot keep quiet”.

While the $ 50 billion software export industry does not expect to be hurt financially by Ohio’s decision, the development has upset it.

Apex software body Nasscom has described the ban as a “discriminatory” trade barrier.

The Prime Minister’s Advisor on Innovation, Sam Pitroda, said the Ohio ban was not much of an issue for the Indian IT industry. The move by the US state had more to do with domestic compulsions.

“When unemployment (in the US) goes in double digits, it is worrisome. So, it is a natural reaction. It’s nothing to worry about. I don’t see it as a long-term issue to worry about,” he said.

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