Stepping up his campaign against outsourcing, US president Barack Obama today asserted his administration would offer tax benefits only to those firms which will create jobs in the country, a move that may hit Indian IT firms in a big way.
"We believe on tax breaks for those firms that create jobs in the US. So we are beginning to do that," Obama said at a press conference in Washington.
His remarks came close on the heels of the Ohio state governor passing an executive order to ban outsourcing, a development that has raised concerns in India which is often described as the world's back office.
All firms that would innovate in the US would get tax breaks, he said.
Even though US economy is growing again, progress has been "painfully slow", he said and insisted that his strategy for the economic recovery was moving the country in the right direction.
He said America, which lost 8 million jobs during the recession, needs to remain competitive with Asian nations.
Obama said before he became president four million people lost their jobs while the number rose to eight million during the recession.
Obama's increasing pitch against outsourcing came amid indications that the issue could become a hot topic in the run-up to the November polls.
The Indian IT sector, which gets 60% of its export revenue from the US, has come out strongly against US moves to ban outsourcing.
New Delhi's concerns on outsourcing and the steep hike in H-1B and L1 visa fees is expected to be raised during Obama's maiden visit to India in November.
This is the second time in a week that Obama has spoken about outsourcing.
Earlier on Wednesday, speaking in Cleveland, Ohio, Obama made it clear that he intends to push this course to propel companies to invest more in the US, thereby opening fresh avenues for jobs.
"One of the keys to job creation is to encourage companies to invest more in the United States. But for years, our tax code has actually given billions of dollars in tax breaks that encourage companies to create jobs and profits in other countries," Obama said.
The president said he was determined to change that.
"I want to change that. Instead of tax loopholes that incentivise investment in overseas jobs, I'm proposing a more generous, permanent extension of the tax credit that goes to companies for all the research and innovation they do right here in America," he said, with Ohio governor Ted Strickland standing by his side.
With election due in November for 37 of the 100 seats in the United States Senate, and the opinion polls painting a grim picture for the Democrats, Obama had sought to project the tax issue as a key policy difference between his party and the Republicans.
"I think if we're going to give tax breaks to companies, they should go to companies that create jobs in America -- not those that create jobs overseas. That's one difference between the Republican vision and the Democratic vision. And that's what this election is all about," Obama said.
Running behind in opinion polls, Strickland of Democratic party, who till now was going out of his way to woo Indian companies, last week passed an executive order that banned outsourcing, arguing that this undermines economic development and has unacceptable business consequences.
