BPO: US law has 'narrow scope'

The United States on Thursday sought to downplay concerns in the Indian IT industry over the recent American legislation curbing outsourcing of federal contracts saying it had a "narrow scope" with regard to its overall impact but made it clear that international trade was a two-way street.

Outsourcing and India: Complete Coverage

"It needs to be clear that international trade has to be a two-way street. There is a feeling in the US, that American market is very open and certain other markets are not as open, and therefore the ability for trade to flow is not equal,"

David A. Gross US Coordinator for International Communications and Information Policy in the Bureau of Economic and Business Affairs, said at a news conference in New Delhi.

Gross said that during his interaction with Indian IT industry, he had not come across any company, which felt that the legislation would impact its current business.

"It is also important we recognize that this legislation has nothing to do with only India. It has to do with all countries outside the US who are focusing on American government services," he clarified.

"The lesson we all learn is that in perception as well as in reality, there is much to be gained by international trade for all trading partners and there has to be a sense of equality associated with that," he said.

Commenting on the issue, Michael Gallagher, acting Assistant Secretary of Commerce said that while US embraced competition to innovate, it strongly resisted barriers to free trade.

"So when we look at outsourcing or offshoring, a case needs to be made about the two way nature of trade," he said.

Asked about his views on hiking foreign investment limit in Indian telecom services from the existing level of 49 per cent, Gross said that as per US experience opening up of such services was important as telecom was a capital intensive business.

"Telecom is a capital intensive business and therefore it is important to draw capital to promote competition. We found that liberalising norms allowed reduction in costs, and increased value for investors," he said.

"Having an artificial limitation, like in this case 49 per cent cap, means that Indian economy is not able to fully benefit from the flow of capital to build robust facilities or significantly bring down the costs," he said.

Lauding the growth in the Indian telecommunications sector, Gross said, "Unlike China, India has a open mindset on standards."

He hoped that issues like interconnect rates and additional spectrum availability would be addressed soon.

Gross is scheduled to visit Bangalore on Friday to meet the representatives of the Indian IT industry.