India's Investment in U.S.: Not Exactly a Win/Win


Back in March, I wrote about the expansion activities of Indian service providers like Wipro and Tata Consultancy Services, which are building facilities and hiring local employees in the U.S. and Europe. Wipro has two development centers in the U.S. and a single center in the UK, with another on the way. TCS earlier this year opened a $13 million U.S. headquarters in Cincinnati.


In an earlier post on Wipro's facility near Atlanta, I noted the Georgia Department of Economic Development's intent to open a trade office in India by 2009, the better to schmooze Indian services providers that might be lured to the U.S. by a weak dollar/strong rupee combination and a desire to enhance their business offering with more U.S.-specific business expertise.


It looks like this is a trend with real staying power, based on a Hindu Business Line India story relating some of the U.S. investments made by Indian companies. It mentions, for instance, that TCS has pumped $3 billion into the U.S. economy. (It's worth noting that the company received some generous incentives from the state of Ohio, including an eight-year, job-creation tax credit worth some $15 million and a $2.5 million grant to help pay planned building renovations.)


According to the story, Indian entities now employ about 30,000 workers in the U.S. Oddly, the number appears to be far larger, based on the figures mentioned in later paragraphs. The story lists Wipro with 19,000 employees, Essar with 7,200, Wipro with 8,000, Satyam with 5,000, HCL Technologies with 3,000, Ranbaxy with 600, Wockhardt with 200, and Mahindra USA with 125. My arithmetic skills are admittedly poor, but that adds up to 43,125, by my calculations.


The article notes that fewer than 30 of Essar's employees in the U.S. are Indian nationals as if this is an unusual fact. Thus, my assumption (and I am open to correction if it's inaccurate) is that 30,000 workers are U.S. citizens, while more than 13,000 are Indian nationals.


The story presents a snippet of a report by the US India Business Council (USIBC) and FICCI (Federation of Indian Chambers of Commerce and Industry):

Indian employers and their American workers contribute billions of dollars to federal, state and local coffers by way of wages, corporate taxes, payroll taxes and income taxes. The ripple effects of these jobs and investments stimulate and enrich local economies nationwide.

While this is true, these kinds of investments won't benefit the economy the way that home-grown investments would and ultimately could further slow U.S. business activity. Here's a quote from an Economic Policy Institute experted interviewed by the Atlanta Journal-Constitution about Wipro's stake in that city:

There's no doubt some jobs will be created, but who are they putting out of business with the products they're selling to the U.S. business community? For the first time we're seeing the process of in-sourcing eliminating domestic jobs.