The Indian government went on the offensive last week on the contentious issue of the loss of US and European jobs to India due to outsourcing.
Offshore outsourcing from the US and Europe to India is the result of barriers to free movement of Indian professionals to these countries, Indian prime minister, Atal Bihari Vajpayee, told a business summit of the European Union (EU) and India in Delhi.
"The demographic profile of Europe and America necessarily means that these countries will need the induction of a younger work force from outside in the coming decades," Vajpayee said.
If there was a more liberal regime for the free movement of businessmen and professionals from India to these countries, this demand for workers could be met within these countries, he said.
"In the absence of such a liberal regime, outsourcing is inevitable," added Vajpayee. "If people cannot go to where the business is, business will eventually come to where the people are."
Vajpayee's remarks came in the wake of growing protest from workers' unions in the U.S. and Europe against offshore outsourcing of software development and business process outsourcing (BPO) to India.
Several US states are also considering bills that will prevent suppliers to state governments from using foreign workers. Such protests have also been voiced in Australia.
The Indiana Department of Workforce Development (DWD) recently cancelled a contract with the US subsidiary of Tata Consultancy Services, a Mumbai-based software services provider, as part of a new program to give Indiana companies and workers a better chance to win Indiana state government contracts.
The emotive arguments about the migration of jobs to countries such as India have missed basic points, including that outsourcing is increasing the competitiveness and global reach of European and American companies, according to Vajpayee.
"The resultant boost to the balance sheets and increased dividend payouts are very much in these countries," Vajpayee said. "The increased profits are also ploughed back into these economies."
Addressing the EU-India business summit, India's external affairs minister, Yashwant Sinha also addressed the contentious offshore outsourcing issue.
"It is in the interest of the Western world to know that we are cheaper and better," Sinha said. "It is our strength. The world has to recognise it and deal with it."
The remarks on offshore outsourcing are the strongest so far by India's government, and indicates that the Indian government is worried that protectionist measures in their main markets in the US and Europe may affect India's software and BPO companies, according to analysts.
Making a case for outsourcing, India's National Association of Software and Services Companies (NASSCOM) in Delhi last month forecast that the US would face a labour shortage of 5.6 million workers by 2010 due to slow population growth and an aging population.
Global sourcing in the form of offshoring and immigration was imperative to fill this labour gap, and protectionism could cost the US economy up to $US2 trillion, NASSCOM said.