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http://www.nytimes.com/2004/03/07/in...ia/07INDI.html

NY Times
March 7, 2004

India Takes Economic Spotlight, and Critics Are Unkind
By AMY WALDMAN

BOMBAY, March 2 — India has finally arrived on the global economic
scene. Unfortunately, like a debutante suddenly told she is wearing
the wrong dress, it is not exactly the triumph India imagined.

In recent weeks, the outsourcing of white-collar service jobs to
places like this financial capital on the Arabian Sea has become the
focus of the American presidential campaign, the brunt of jokes on
late-night shows, the subject of angry Web sites, and the target of
legislation in more than 20 states and Washington.

Long caricatured in many American minds as home only to snake charmers
and poor people, India is now being caricatured as a nation of
predatory brains set on stealing American jobs.

The strong reaction to the shifting of jobs is spawning frustration in
India, a country the United States was cheering not so long ago as it
began to open a largely socialist, closed economy and enter the global
arena. It is also surfacing as a potential irritant in relations
between the countries. Indians say they are doing exactly what the
United States wanted, and bridle at the new criticism as a double
standard.

"The U.S. is propagating capitalism — we don't really understand why
they are so scared," said Ravi Shankar, 36, an employee of Tata
Consultancy Services, India's largest technology services company. "If
you're going to talk about competition, you should have no fear — may
the best man win."

But now India's pride has become America's pain. Over the last decade,
riding technology advances, India's engineers and English-speaking
college graduates have been taking on more work — from credit-card
complaints to software programming to research for American companies
half a world away.

The uproar over outsourcing shows no signs of abating, because
outsourcing itself is only likely to grow. India's success has both
contributed to and coincided with stagnating employment in the United
States. Both countries face elections this year. As a result, an issue
that would largely be confined to corporate America has become
politicized and emotional. "India has joined the ranks of other big
job thieves — Japan, China and Mexico," the Indian magazine Outlook


president, has called chief executives who shift work abroad "Benedict
Arnolds."

"Whenever such issues are taken up in competitive politics, the
economy suffers," said Arun Shourie, India's minister for
disinvestment, communications and information technology. He has spent
the last two years fighting to privatize India's bloated state-owned
enterprises, facing fierce political opposition along the way.

Indeed, the furor in the United States is highlighting India's own
ambivalence toward the economic reforms that began here in the early
1990's. The competitiveness of India's new industries stands in sharp
contrast to the high tariffs and red tape that still shelter many
other parts of the economy.

American officials have repeatedly expressed frustration at the
relatively low level of American imports to India. While total exports
from American companies to India grew to $4.1 billion in 2002 from
$2.5 billion in 1990, the United States still has a trade deficit of
about $9 billion with India. On a visit to New Delhi in February,
United States Trade Representative Robert B. Zoellick cited India's
high tariffs — like a 38 percent applied agriculture tariff, which is
three times as much as America's. "We want to keep our markets open,"
he said, "but to do so we need to be able to open markets abroad."

His comments were interpreted here as evidence that the Bush
administration would seek to use the reaction toward India as a lever
to pry open wider India's economy.

Mr. Shourie said that when India finally opened its agriculture
markets, it would affect "millions of people" — far more than are
being affected by India's success in information technology. "If the
United States feels we must understand their political compulsions,"
he asked, "why is it that American politicians or trade negotiators
sitting at the table would not understand our political difficulties?"

He worries, he said, that the reaction in the United States will
strengthen the opponents of India's own economic reforms. "It gives a
very strong handle to persons in India who oppose opening up," he
said.

Indians say that the beneficiaries of outsourcing are far fewer than
Americans realize. Well under a million people work in information
technology services. Most of India's population of more than a
billion, still largely rural, has never heard of outsourcing or
benefited from it. Unemployment in India — far higher than in the
United States — is at its highest level in decades, many economists
say. Officially pegged at 7 percent, with more than 40 million
registered job seekers last year, the real unemployment rate is
probably three times that, economists say.

Vivek Paul, vice chairman of the Bangalore-based Wipro Technologies,
calls it "perceptual amplification."

"If three million jobs have been lost in the U.S., and 100,000 jobs
created in India, every one of those three million thinks, `That's my
job,' " he said.

The danger is that anger in the United States will affect relations
with India that otherwise have only deepened in recent decades. There
are nearly two million Indian-Americans in the United States today —
with the highest income of any ethnic group — and India is the second
largest country for legal migration to the United States, after
Mexico.

The United States now has more foreign students from India — more than
70,000 — than from any other country, and the information technology
industry itself seems to represent a sort of synergy, with many
Indians working in Silicon Valley, and innovation flowing both ways.

That spirit is showing strains. While Indian officials have decided
that their best strategy is to let American corporations fight the
political battle in the United States, they cannot resist the
occasional rhetorical flare-up. "Those who lecture about free trade,"
Mr. Shourie said, "should practice it."

But not everyone here cheers India's new identity as what Babu P.
Ramesh, writing in the Economic and Political Weekly, called "one of
the prominent electronic housekeepers to the world." Indians say they
face the same forces churning the American job market. As the use of
information technology increases here, so, too, will the labor
displacement that America has experienced. And over time, many of the
jobs that have come to India could move on. As new competition emerges
from other countries, Mr. Paul of Wipro said, "we'll have to swallow
the same medicine of globalization."