Indian Investment in U.S. Results in Job Gains

Ann All

While practically everyone in the IT field can offer anecdotal evidence of American jobs lost due to companies opting to outsource some functions or hire foreign visa holders willing to work for less money than their U.S. counterparts, there isn't much hard data to support the idea of a massive loss of jobs. It's hard to prove this is happening because, as Robert Kennedy, director of the Global Initiative at the University of Michigan's Ross School of Business, said in a Forbes interview last year, outsourcing-related job losses can be "incredibly hard to observe and identify."

 

It seems somewhat easier to track job creation linked to foreign investment here. According to a new report produced by the University of Maryland, India-US World Affairs Institute and Federation of Indian Chambers of Commerce and Industry, Indian companies invested $26.5 billion in the U.S. from 2004 to 2009, resulting in the creation of nearly 60,000 jobs. Mining and manufacturing accounted for the bulk of the investments.

 

The Wall Street Journal offers several instances of Indian economic activity in the U.S., including two investments by CG Power Systems USA Inc., a subsidiary of Crompton Greaves Ltd., which is part of Indian conglomerate Avantha Group: construction of a $20 million transformer manufacturing facility in Missouri and the establishment of a $20 million nanotechnology research center at the University at Albany's College of Nanoscale Science and Engineering.

 

I wrote about Indian outsourcing companies' expansion in the U.S. back in 2008, noting that both Wipro and Tata Consultancy Services (TCS) had opened development centers here. I shared my belief that a significant number of folks employed at these centers were Indian nationals. A recent Economic Times story seemed to confirm this, indicating Wipro planned to boost the percentage of Americans in its U.S. workforce to 40 percent. (The article didn't indicate the current breakdown, but obviously more than 60 percent of the folks Wipro currently employs here are not U.S. citizens.)

 

While hiring U.S, citizens can gain Indian companies some positive PR in the States and may help them win new clients, followers of the Indian stock market see employing folks in higher-wage countries as a drag on Indian companies' profits. From an analysis of Infosys and TCS:


 

In terms of employee costs, Indian software firms have a significant advantage. Salaries for software engineers in India are much lower than those of their counterparts abroad. Also if other benefits, including pension and insurance are counted, it is significantly lower. TCS earlier had a higher onsite component of revenues This is what caused employee costs to be on the higher side. However since it made a strategic decision to move towards offshoring, these costs have reduced.

 

Still, India's demonstrated willingness to invest in the U.S., along with a prediction from Indian Finance Minister Pranab Mukherjee that annual economic growth in India may exceed 10 percent in the next five years, have both countries interested in expanding economic and other relationships. Mukherjee and U.S. Secretary of State Hillary Clinton made lots of statements about increaaed cooperation at the U.S.-India CEO Forum, which was co-chaired by Tata Group Chairman Ratan Tata and Honeywell CEO David M. Cote. The forum of two dozen CEOs recommended the countries explore joint research and other opportunities in four core areas: infrastructure, clean energy, education and electronic health/biotechnology.



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