In a move that could shake the foundations of India's IT services industry, US President Barack Obama on Thursday said he will end tax breaks to American firms that ship out jobs abroad.
"To encourage ... businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America," he said in his first State of Union address.
"Now, the House has passed a jobs bill that includes some of these steps. As the first order of business this year, I urge the Senate to do the same... People are out of work. They're hurting. They need our help. And I want a jobs bill on my desk without delay," he said. India, which has earned the name 'world's back-office', could suffer the most by this move.
According to software services industry body NASSCOM, IT sector's revenue accounted for 5.8 per cent of India's gross domestic product in 2008-09, up from 1.2 per cent in 1997-98.
American companies primarily move jobs abroad to save costs, with no dent on services as countries like India boast of an English-educated workforce -- be it IT engineers or for jobs that had to be done over phone. "But the truth is, these steps won't make up for the seven million jobs that we've lost over the last two years," Obama said.
"Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed," Obama said. He said job creation would be be the country's number-one focus in 2010, and called for a new jobs bill.
The bill will provide for taking $ 30 billion of the money Wall Street banks repay and use it to help community banks give small businesses the credit they need.
"Now, the true engine of job creation in this country will always be America's businesses. But government can create the conditions necessary for businesses to expand and hire more workers," he said. He also announced that US would invest massively in skills and education of its people.
"Still, in this economy, a high school diploma no longer guarantees a good job...To make college more affordable, this bill will finally end the unwarranted taxpayer-subsidies that go to banks for student loans," he said. "Because in the United States of America, no one should go broke because they chose to go to college.
The US president also announced that he intends to double US exports in the next five years, sending an indirect message to China and other export-reliant economies that they are not the only ones aggressively seeking new markets.
"We have to seek new markets aggressively, just as our competitors are. If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores," Obama said. PTI
