India's Technology industry 2012

According to The National Association of Software and Services Companies (NASSCOM) of India, this year IT services outsourcing industry will pass the $100 billion USD in export and continue to expand faster than previously expected. The chairman of NASSCOM announced: "This has been a very good year for the India's IT industry as we have seen a growth of over 16 per cent. Total revenue of the IT outsourcing sector is estimated over $101 billion USD. If we continue this trend, our industry can reach $225 billion by 2020. However, we will need to add 1,20,000 more software jobs to support our ongoing activities and for future growth. In 2011, we has created over one hundred thousand new software jobs but we are still short of skilled workers as we could do more.”

To counter the notion that India's outsourcing industry has taken jobs from U.S workers, NASSCOM announced that Indian IT companies have employed over 100,000 US workers in the U.S and they have plans to hire more. However, the hiring of local workers do not change the attitude of European countries toward India.

For years, India and the European Union (EU) have been working to get a free trade agreement but it seems that it may not happen soon. The main reason is the differences over India's taxes on European cars and the EU 's reluctant to allow more market access for India's software service companies. To protect local market, India placed a high level taxes on European car export to India, which make them about 10 times greater than Indian vehicles.

For India, a Free Trade Agreement (FTA) with EU would help its rapidly growing IT companies to expand into the European market and dominate this area just like they did in the U.S. India economy has enjoyed two decades of rapid growth driven by IT outsourcing, even its manufacturing and foods exports have not doing well lately. European countries are facing financial difficulties, with rising unemployment and a debt crisis. Autos are a key export for Europe and they want to sell more to India's newly wealthy people. But Indian places strict tariffs taxes on all imported EU cars make it impossible to sell them. An EU representative declared: “These are prohibitive tariffs, the market is basically closed to us. We cannot let them sell software services when we cannot sell our automobiles."

India wants EU to ease regulations that restrict the growth for the software services companies to deliver IT services to European customers but EU countries are afraid that allowing more IT outsourcing at a time of rising unemployment may not be a good idea. Lessons learned from other countries indicated that if India is allowed to expand in this area, many local software companies will not be able to compete with the low costs offered by Indian companies. When these local companies were gone, the costs from Indian companies will increase very quickly.

Sources

  • Blogs of Prof. John Vu, Carnegie Mellon University

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