US Must Balance Dependence on India for IT Services | Best countries
As America searches for strategies to offset today’s rapid growth in China, no nation is more important than India. Only India can match China’s vast population, the availability of low-cost labor, and the deep base of world-class technical talent.
The United States and India have strong political, cultural and linguistic affinities, and the two nations view China as a military and geopolitical rival. While US and Indian interests are not always aligned, the potential synergies, including moving manufacturing from China to India, are real.
But there is another, more worrying dynamic. Although COVID-19 has made the United States too aware of its dependence on China for many essential manufactured goods, our dependence on India for information technology (IT) and other high-tech services receive much less attention. This growing digital dependence takes five main forms:
- America is the largest market for Indian IT service providers such as TCS, Infosys, Wipro, HCL, Cognizant and others, who collectively achieved sales of around $ 50 billion in the United States in 2020 .
- US IT service companies such as Accenture, IBM, Deloitte, and DXC do much of their actual work in India. These four companies alone employ some 400,000 people in India.
- Over 1,000 US companies have established their own operations in India, employing approximately 1 million people for everything from back office IT and call centers to strategic innovation and research and development.
- There are over 400,000 non-US residents working in the US under the H-1B visa program. About three-quarters are from India, and most of them are in IT.
- Americans of Indian descent have a significant and prominent presence in Silicon Valley, as do Indian students and professors at elite American universities, especially in the STEM fields.
The first three items above represent some $ 80 billion in computer services imported each year, far less than the more than $ 400 billion in goods that America imports each year from China, but a huge sum for just one industry. industrial. Additionally, there is a way that America’s dependence on India is greater than it is on China. With China, American dependence is limited to manufacturing industries. But just about every industry in America now relies on India for IT support. And while depending on India isn’t as scary as being dependent on a geopolitical rival like China, it is nonetheless an addiction.
There is a second troubling parallel. Over the past 30 years, China has grown from a contract manufacturer of commodities to a global market leader in many strategic sectors. Likewise, the Indian IT service industry began by providing low cost back office services. However, in recent years, it has expanded into cutting-edge areas such as artificial intelligence, machine learning, analytics, cloud migration, Internet of Things and other forms of ” digital transformation ”. Much of “American innovation” is now outsourced to India, especially in digital technologies and life sciences.
If Indo-American relations continue to strengthen and America look out for its interests, these dependencies should prove to be manageable and will certainly help the United States (and the free world) compete with China. But there are at least two scenarios where current addictions pose significant risks.
The first area is reciprocity. Indian IT service companies greatly appreciate their ability to easily do business in the United States. Although the US tech giants, particularly Google, Amazon, Microsoft and Facebook, are well positioned in India’s growing domestic market, doing business in India remains difficult. The United States and India are often at odds over intellectual property protection, taxation, regulation, data governance, privacy, preferences for local businesses, and other policy areas.
More broadly, India has its own self-sufficiency, the movement in Hindi “Atmanirbhar Bharat” popularized by Prime Minister Narendra Modi which seeks to reduce India’s dependence on foreign companies. When negotiating in these complex areas, it is never good to depend on the people opposite.
The second scenario concerns China. Although relations between India and the United States have improved significantly in recent years, there is no guarantee that this will continue. India has a long history of non-alignment and the current tensions with China may well fade over time. If they do, the enormous economic potential of the India-China relationship could be highlighted. The nightmarish scenario for the United States would be the combination of China’s manufacturing prowess and India’s IT services and English capabilities. It is not hard to imagine how the world’s economic center of gravity could decisively shift east.
For too long, the United States has ignored its growing dependence on a booming China. So far he has done the same with India. America must take advantage of India’s vast capabilities to tackle China effectively. But after experiencing one addiction, the United States would do well to avoid another. As with China, it starts with admitting there is a problem, tidying up your own house, insisting on trade reciprocity, and finding a way to leverage global capabilities while maintaining control over your own. destiny.