Sunday, July 26, 2009


Much is being talked about the exemption of tax breaks for American companies who outsource jobs to places like India, by president Obama. It is also not very surprising that the media is playing its part by instilling fear into the minds of the employed. What we fail to understand is that these tax changes will only FACILITATE THE TAKEOVER OF U.S FIRMS BY INDIAN ONES. By now, I am sure you must be thinking I am out of my mind. Hold on corny. I intend to dispel that notion in the following paragraphs.

The U.S imposes taxes on the GLOBAL EARNINGS of its companies and not just its indigenous earnings. Various companies protested that these taxes made them uncompetitive in low-tax countries.

For ex. American company, Coco cola will be loosing out revenue in the form of taxes paid to the U.S government as compared to Parle’s THUMBS UP who are paying lesser taxes to the Indian government. This increases the advantage of THUMBS UP in terms of revenue earned as compared to Coco Cola.

(Coco cola has purchased THUMBS UP. Simple policy… You can’t beat ‘em, BUY ‘EM!)

Therefore, to reduce this disadvantage, the American government made profits earned abroad tax-free provided it is brought back to American soil. This eventually helped companies to establish large operations and eventually shift jobs to countries like India and china where the labor is cheap.

A number of U.S companies saw this as a lip smacking opportunity and began to outsource their jobs. This reduced the cost of production and increased the revenues for these companies.

What the Americans did not realize is that by outsourcing the jobs the Indians began to adapt and upgrade. The Indians saw this as a rare opportunity and began upgrading their skills and understand the importance of computers and began to carry their work efficiently and quickly. Soon American companies began outsourcing their R&D and other skilled work. What was happening is, Indians were developing their skills and knowledge and the Americans were paying the Indians to do so!

Now, NASSCOM says 400 out of the fortune 500 companies now have operations in India. India has become a hub for brain-intensive manufacturing. It is to such extent that the financial markets penalize U.S companies that do not outsource as their competitiveness is eroding. Accenture, a big consultancy company has more employees in India than in the U.S. IBM has 70,000 employees in India and it’s growing fast.

IN SHORT, AMERICA NEEDS INDIA and America will outsource.

So, even if Obama’s legislation ends the tax breaks, it will still be favorable for the companies to outsource in India. Shifting jobs back to the U.S will just mean suicide for the companies due to the high costs especially in these times of recession.

Also, if the tax breaks are denied, it only improves the competitiveness of the rival Indian companies.
The ill effects of the recession have not affected companies like TCS or WIPRO as compared to ACCENTURE or an IBM. Therefore, once the Indian companies establish their supremacy and thrive in the market it will only weaken the U.S companies and facilitate their take over by the Indian companies.

To sum it up, the message is simple: You have exploited us enough and more to your advantage. Now if you cut a job in Bangalore, we will create 10 in Buffalo. So, do the talking and make the American people happy but don’t turn it into actions.


siddarth said...

A well written piece. i like the flow of ur ideas. keep it up :)

Marianne de said...

Yes, I can see my drumming in the fact that a journalist must focus, has finally sunk!

If this is the case, then why has WIPRO closed down its BPO and emptied out its three story building next door to our home on Castle Street?

Adi said...

Wipro reported its earnings after India's No. 2 software exporter, Infosys Technologies Ltd, had posted a near-10 per cent rise in profit and gave a confident medium-term outlook, but sounded a note of caution on its near-term prospects.

Mr. Azim Premji said "We would like all the acquisitions to be made outside India so we can globalise our workforce.", indicating that an expansion is on the way.
Wipro is determined to reach 10 million square feet floor space across India over a period of time, he added.

However he plans to be very cautious about his expansion and approaches because of the recession. These statements clearly state that Wipro is expanding and grabbing oppurtinities where other comapnies have lost due to the recession.

"Any business which has been in full growth mode for five years does accumulate a certain amount of excess baggage." he remarked. This may PROBABLY be the reason why the Bangalore division was closed.

He said the goal is to shift more business from Tier-I to Tier-II cities especially to places like Madurai, Coimbatore and Trichy. This may also be another reaon for the closure.

In short, my argument is that we are becoming more competitive and WIPRO's competitiveness is only going to become better as compared to an Accenture or a IBM.

Yulia D'Souza said...

nicely written in your typical tongue -in-cheek style bro;-) do you find the time??? wait dont tell me, i know i gotta make it.

Abdul said...

good... good... buddy!! Damn ! i shud've made time to read these before. of wat yu've written here i should say tat from the outlook it sounds good for us...

Anonymous said...


Good one. There are other advantages other than cost effectiveness alone. Time diff is another. Shortening the time to develop and market is one another.

I dint understand "You have exploited us enough and more to your advantage. Now if you cut a job in Bangalore, we will create 10 in Buffalo."

Your sentence mean, cutting job in Bangalore will create more jobs in Buffalo. NOT True.

Did you mean, cutting one job in Bangalore would result in cutting 10 jobs in Buffalo?

- Saba Mama

Adi said...

The statement was an implied exxageration. It referred to Obama's comments on cuting jobs in Bangalore and creating those jobs for American people in Buffalo. Just a strong retaliation.

N yup, time is vital considering the Indian labour works in SHIFTS for 24 hours a day.
A very huge factor.

Tom said...

Good job done there, Aditya. Its what every youngster in our country should feel.

As I mentioned earlier, our country along with most nations continue to be beleaguered by the misfortunes of the greenback. But we should and are breaking out of it. The revenue earned by us from outsourcing our skills is around 60 billion dollars. Now this is primarily confined to the IT industry. Is it any wonder why this industry continues to feel the tremors of the fall-back across the seven seas? The comparitively competitive resource cost coupled with our inheritance of the English language, has always made India the preferred destination. You are right when you say that America needs India in the face of these overriding advantages. But lets face it - India needs America too.

India needs to have money pouring in to tilt the balance of payments in our favour. We need to augment and strengthen the investment climate within so as to ensure that India is always the preferred destination.. The fact that we have one of the best interest rates in the world should induce others to park their funds in our country but we also need to portray financial and political stability. We need to improve our infrastructure. our communication, our transportation and of course, unwarranted procedural delays.

Attitude and integrity play an important role here. That is why I sent you that mail on Abdul Kalaam's speech. You might have heard it before but its relevance in todays world cannot be over-emphasized.

I'm not sure if I have properly understood your statement, "........the American government made profits earned abroad tax-free provided it is brought back to American soil." American 'profits' canot be made here and taken back to their country. What they are doing is reducing costs by outsorcing here and thereby improving competitiveness in their market..

Its a question of their survival and we need to see for how long Obama will be able to maintain his political stance on this.

roshan said...

the effort is great!

its necessary to keep in mind USA is VERY much the seat of imperialism, thus anything is possible! the capitalist economy seeks market quote you in the article,"You can’t beat ‘em, BUY ‘EM!" applies even here; if it happened to thumbs up, the other sectors are 'potentially' viable too.

last but not the least. Obama is here to MAKE his mark. so far, he's determined, prudent and has survived his tenure. i have a strong feeling he will be a legend, not for his romanticised hybrid ethnicity but his determination and courage!

again i repeat buddy, sincerely, GREAT effort!

“Let me say, at the risk of seeming ridiculous, that the true revolutionary is guided by great feelings of love.” Che