India "dismayed" at US anti-offshoring law

A new US law that will ban the outsourcing of US federal public sector work to low-cost offshore countries has been slammed as protectionist by India's IT industry.

The US bill was passed by the Senate last week and is now just waiting to be rubber-stamped by President George W. Bush before it becomes law.

Kiran Karnik, president of the National Association of Software and Services Companies (Nasscom), said in Indian newspaper reports that he was "dismayed" by the law.

"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 WTO and long espoused by the United States," he said.

The law is not likely to have a major effect on India's burgeoning offshore IT industry as US government contracts account for just two per cent of India's IT income, but the Indian IT industry is worried that it will set a damaging precedent.

Indian software and IT services companies are also involved in a battle with the Indian government over proposals that could see the Indian subsidiaries of European and US companies taxed on core activities.

The revenues from India's IT industry are expected to rise by a third to £8.5bn for the fiscal year ending in March.