Indian IT and the Obama regime

India — the world’s largest democracy — had monitored the presidential race in the United States — the world’s oldest democracy — very closely, an

Cities that are IT hubs IT service megavendors

d with good reason. It was a historic election in many respects, and Barack Obama’s inauguration in January will mark several new beginnings.

There is no doubt, with the economy struggling in the US and elsewhere, Mr Obama has his work cut out for him. He has often spoken of reviving America’s competitiveness, and he has repeatedly promised to “change” its course. Doing so while balancing the needs of three key stakeholders — consumers, workers and investors, both at home and abroad — will be challenging. A judicious approach in not undermining the opportunities for the 150 million working class, while balancing the expectations of more than 50% of the US households that own stocks or have stayed invested in mutual funds and the 300 million consumers will be called for.

Why? Because so much of the economy has become truly global. There are fewer and fewer “American” or “British” or “Indian” companies now. There are more and more multi-national or global companies that happen to be based in the US or Europe or India. Consumers, suppliers, workers and investors are to be found everywhere in the world.

Historically, American investments in global economies and corporations have spurred and sustained growth. This is not about to change easily. (An emerging economy like India imports goods worth $250 billion from the US, while it exports about $160 billion annually. It is pertinent to note that American-owned investment companies by far have the largest investments in most of the large India-based IT companies).

We may see a demand for more protectionist US trade policies. Many industries — certainly information technology services — have long been global. As already mentioned, customers and suppliers are located all over the world. Projects are priced from a global perspective, rather than a local one, and new sources of growth emerge daily from developing economies. It has become clear: the surest path to sustainable prosperity is to be globally competitive, rather than locally subsidised.

Restrictive practices or misjudged decisions can be counter-productive and create a global backlash for US-made products and services, apart from increasing the cost of products and services to the consumers in the US and harming their investor community.
Several of the changes we foresee in the next four years present exceptional opportunity for the IT industry, while some may pose short-term hurdles.

From an opportunity standpoint, the US government is likely to increase its regulation of several industries, notably financial services, healthcare and energy. In addition, the restructuring that is already taking place in these sectors will probably continue. These moves could prove to be advantageous to Indian-based professional services providers as many US companies will need help with their systems and processes to comply with more stringent governmental oversight.

Additionally, the new administration will likely focus more on environmental issues. As such, carbon emission reduction and carbon credit trading will come to the fore. Both of these represent opportunity for Satyam, which has an established track record in green engineering and sustainability.

US companies — like everyone else — rely very heavily on global expansion for their growth and competitiveness. A recent survey highlighted the clear benefits of globalisation to the growth of US Fortune 500 companies. Moves to restrict the worldwide flow of talent to the US could prove to be detrimental.

From a tax standpoint, Obama’s administration may favour more redistributionist policies and increased taxes for those who rely on external markets. It would be good to look deeply at the global learning in this regard — both in developed and developing economies — before arriving at a firm go-forward plan. Today’s approach, which encourages and enables entrepreneurship and wealth creation, has always proved to be much more successful.

I believe the President-elect recognises just how global the economy has become, and that his first priority must be to get the US economy back on track by helping companies to transform their businesses, improve productivity and enable value creation. Doing so — by synergising and harnessing the collective intent, which he has demonstrated so effectively during the campaign — will benefit investor and consumer confidence, global growth, sustainability and prosperity — not only for the US, but for the world at large.