India has emerged as a reliable outsourcing partner for many western countries. The primary reasons for outsourcing work to India are: cost, skilled labor, and attractive government policies. Indian companies have been able to handle the influx of software development outsourcing work efficiently but some events in the past years show that the privileges that India has enjoyed so far might not stay for long. Let’s look at some of these events and how experts believe they will affect the Indian outsourcing industry.
Brexit
Britain is one of the most prominent countries that outsources work to India. The Indian outsourcing industry was taken by a shock in the mid of 2016 when Britain decided to exit from the European Union (EU). The immediate effect was felt when the value of pound hit a low. There were a few more glitches down the way.
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- Speculations: As soon as Britain cast its vote, experts began to speculate the effect that this decision will have on Indian companies. The biggest challenge in reaching a conclusive announce was anonymity of the terms at which Britain exited. Almost everyone had something to guess but without definite knowledge the only estimates were that:
- If the terms of Britain’s future association with EU were not positive, then the businesses with interest in European countries and headquarters in Britain might have to undergo challenges.
- Major long-term differences in the value of British pound might force Indian companies to renegotiate deals with the foreign counterparts.
- The changes in the structure of the financial institutions might affect companies that are providing services to this sector.
- Facts: An article published in September 2016 on impact of Brexit suggests that the effect so far has been positive. All the speculations above were short-lived or may be did not really happen. The article cites a report on ministers from India and Britain meeting to enter into a fresh trade agreement. This seems to be a positive step for the Software development outsourcing industry.
Britain is one of the highest contributor of G20 and its exit from the EU will not impact India alone. Many other countries that are involved in the financial interaction with Britain will be impacted. Six months have passed since Britain exited EU and so far nothing concretely negative has surfaced for India or any other partners.
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U.S. Presidential Elections of 2016
This was one of the most talked about event of 2016. The news channels around the world got high TRPs with reports on the two candidates who had a very different thought process. But, one thing that always hit the headlines was Donald Trump’s view on immigration and outsourcing.
- Speculations: Ever since the candidates were announced, experts started sharing views on how the policies in the U.S. might change with the result of the election. But, the real deal started when Donald Trump won the elections. While there are many speculations, the ones pertaining to India are that:
- Time and again Trump has talked about bringing in stricter laws for immigration. Therefore, the guesses pertain to the future of Indian immigrants already working in the U.S.
- Stricter visa rules and hike in fees might make it difficult for some Indians to acquire visa. Although, contrary to popular belief the employment visa in most cases is borne by the employers.
- The emphasis on providing employment opportunities to American citizens might force the government to impose heavy taxes on outsourcing which would make it less lucrative for companies to outsource work to Indian Software development outsourcing industry or hire immigrants.
- Facts: There is nothing substantial at the moment because Donald Trump has not been sworn in. The actual impact for India can only be estimated on the basis of what he has expressed in his debates and speeches. While one thing that is sure with the introduction of the Protect and Grow American Jobs Act is the seriousness of the government to look at the outsourcing laws. To work on the exploitation of workers, there have been some strict curbs on the H-1B visa norms. We can only wait to see what is in coming once Trump acquires the office.
Trump has spoken positively about India in one of his speeches but that was a brief mention and nothing substantial can be inferred from that reference to India. That small phrase has already been quoted a lot of time and I don’t want to follow the lot.
Conclusion
The long-term effects of these two political events are yet to be clear. But, one thing that is clear is that either for good or bad, the outsourcing industry will change. There can be a lot of opportunities or there can be limited ones. While the Britain’s exit from the EU looks positive for Indian companies. The experts are in disagreement on how Donald Trump’s policies will affect India. Hopefully, by mid of 2017, there will be some evidence to prove the impact of the two events.
The good news is that Indian outsourcing giants continue to record revenue increase and the bad news is that the competition for India is increasing. Following the footsteps of India, neighboring Asian countries like the Philippines are offering competition. This is just one of the other aspects that Indian outsourcing companies need to watch out for, other than the political and financial happenings around the world.