Is new US tax plan helping India?

The global downturn has slowed the rapid growth in India’s outsourcing business, but only slowed it. In fact — because of the pressure on companies, and even governments, to reduce costs — many outsourcing businesses are booming.

And a mood that was deeply uncertain just six months ago has turned much more optimistic. Unemployment has risen to 8.9% in the US, a 26-year high, increasing longstanding pressures to “keep jobs in America”. But managers of companies big and small, squeezed between political pressures and the necessity of slimming down to survive, are choosing the bottom line.

J Brandon Black, president and CEO of the Encore Capital Group, a debt collection company based in San Diego, said he planned to significantly increase his work force in India in the next few years, in part because of the tough economic times.

“The thing it boils down to is the supply of well-trained educated labour at reasonable prices is just too great to ignore,” said Black. In India, “we’re hiring college-educated people.” The company is not doing that in the US, where it would incur greater infrastructure and healthcare costs. “Outsourcing is here to stay,” Black said. Some of America’s biggest companies continue to invest in India, even as they trim costs at home.

HP said last month that it would cut an additional 6,400 jobs, on top of the 24,000 it said it was eliminating in September after a merger with Electronic Data Systems. About half of the September cuts are expected to come from the US. In March, the computer giant said it was opening “HP Software University” in eight cities in India to train software testers.

Honeywell International, the manufacturing behemoth based in Morristown, NJ, said it would invest $50 million in a new research and development facility in Bangalore that would employ 3,000. The move comes after Honeywell began a reorganisation, closing plants and trimming jobs in US.

The company declined to comment for this article, but when it initially announced its India plans, its chairman David M Cote, said about half of Honeywell’s employees and half of its business were outside the US. “Anything that creates any kind of protectionism, anything that stops the globalization activity, will be harmful,” he said.