My comment on PeerPower

Subject : Question: Will US protectionism on outsourcing hurt the Indian IT sector?

Protectionism or not, what matters is what happens next. Tax-cuts aside, the fact that most outsourcing enterprises "could" pull back is a threat that can no longer be ignored. With the Indian economy largely dependent on the service sector, the threat of an economic downturn in India, looms large. While China has from the very onset secured its internal industries, what are India's options? The sagging and overstaffed PSU's can no longer act as remedy. India will have to wake up to its nemesis soon. Concerted efforts and drastic corrective actions are needed with immediate effect.

We need to focus on strengthening our own manufacturing sectors. Subsidies and government grants are required to encourage budding entrepreneurs, thereby creating more jobs. Higher cess should be levied on electronic/appliance imports to allow emerging Indian enterprises (that lack scale) fair competition. Encourage private entrees into essential government sectors like defense, funding hi-tech r&d and offering lucrative grants. Our primary concern should be to protect, secure & eventually empower existing Indian industries from foreign competition.

It is unlikely that outsourcing firms will decapitate their Indian operations immediately. Keeping in mind the lucrative markets both within India as well the Asia-Pacific countries, tax-cuts may not seem a lucrative lure in the long term. We have therefore, a buffer of time. It would however be in our best interests to act before the buffer expires.