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Indian IT torn between job-hungry world leaders

What’s good news for President Donald Trump is bad for Indian Prime Minister Narendra Modi
Outsourcing
India's Prime Minister Narendra Modi in New Delhi, India, on April 10. REUTERS/Adnan Abidi

By Una Galani

MUMBAI (Reuters Breakingviews) — America may come first in the battle for jobs created by India’s outsourcers. The industry is expanding services that require spending more face-time with clients overseas.

Yet sending more Indians abroad to carry out such work may fall foul of U.S. efforts to limit work visas. Infosys’ plan to hire 10,000 Americans over two years therefore kills two birds with one stone. What’s good news for President Donald Trump is bad for his Indian Prime Minister Narendra Modi.

Jobs are a priority for both leaders. Some 12 million people join India’s workforce each year. Official data is sketchy but formal jobs are in such short supply that 2.3 million people once applied for 368 low-level clerical jobs in the state of Uttar Pradesh in 2015. And while the U.S. jobless rate is at 4.5 per cent, its lowest since 2007, Trump too wants to create new jobs and keep the ones that are already based there. He will no doubt laud Infosys’ plans to hire and open new technology centres, including one in the hometown of Vice President Mike Pence.

True, this will prove more expensive than hiring lower-cost Indian graduates, training them in places such as Infosys' giant centre in Mysore, which can hold up to 14,000 people, and then posting them overseas. But Indian IT firms’ profit margins are healthy enough to absorb the higher costs. Nor does Infosys see any impact on Indian jobs for now.

That may change in the long run given growth in services, such as artificial intelligence, which require employees to be located closer to clients. North America accounts for up to 62 per cent of Indian IT firms’ revenue, according to Indian broker Kotak. And visas are required for up to four-fifths of these firms’ United States-based workers. These companies may therefore have little option but to adjust.

IT hiring alone can’t meet India’s job needs. But as brokerage Ambit points out, other local industries like financial services and telecoms, which have been big white-collar employers, are also ready to shed workers. American firms might keep sending back-office jobs Modi’s way but for Indian IT, it is America first – India second.

CONTEXT NEWS

• Infosys said on May 2 that it plans to hire 10,000 workers in the United States over the next two years and open four technology and innovation centers in the country.

• The first center will open in August in Indiana, the home state of U.S. Vice President Mike Pence.

• U.S. President Donald Trump has ordered a review of the H1-B visa program on which Indian outsourcing firms are heavily dependent.

• In a telephone interview with Reuters from Indiana, Infosys CEO Vishal Sikka said his company plans to hire U.S. workers in fields such as artificial intelligence.

• “When you think about it from a U.S. point of view, obviously creating more American jobs and opportunities is a good thing,” Sikka said.

• Last month, two industry sources told Reuters that Infosys was applying for just under 1,000 H-1B visas in 2017. One of the sources said that compared with about 6,500 applications in 2016 and some 9,000 in 2015.

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