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Recent comments by President Obama regarding the loss of American jobs as U.S. companies push services like call centers and software development overseas have produced considerable irritation and uncertainty in India’s business and government circles, according to Pran Kurup, writing at the Outside Edge blog of the Times of India. Kurup noted that the Indian software industry quickly voiced concern after President Obama appeared to call for penalties on companies that outsource jobs overseas in January’s “State of the Union” address. Kurup quoted Indian Finance Minister, Pranab Mukherjee, responding to President Obama: “Protectionism ultimately does not help the country that resorts to protectionism.”

Kurup, however, sees little immediate threat to India’s software and call center industries despite the protectionist language increasingly found in American political speeches. He notes that most of President Obama’s anti-outsourcing statements refer to the loss of manufacturing jobs, of which India has acquired relatively few from the U.S. Thus, any American trade legislation to mitigate outsourcing is most likely to be directed against manufacturers and China, Kurup argues. “While anti-outsourcing legislation might certainly affect India, the impact is likely to be far greater on the manufacturing sector than on IT services,” he observes.

Still, Kurup says, India may someday face a similar situation to the American mid-west, where local economies were devastated when manufacturing companies started sending jobs and factories abroad. As call center technology has spread, other countries, including the Philippines, are now competing with India to provide services for North American and European firms and India may not offer the cheapest services in the long run. If call center operations begin to leave India for lower cost destinations in southwest Asia, Indians should expect to feel an economic squeeze, Kurup contends. “Should this happen on a large scale, youngsters who have spent years serving the call center industry may face a similar crisis, except that the time span might be shorter than in the manufacturing industry.” Kurup says that regardless of whether or not the U.S. will actually adopt trade protectionist legislation, Indians should not be surprised to hear American politicians talking about it. “With many of [President Obama’s] programs stymied by the Republican Congress, and the Presidential election round the corner, he is left with no option but to step up the anti-outsourcing rhetoric. The US Presidential election is still eight months away, so this rhetoric over the next several months is only going to get worse,” Kurup warns.

Given this, and the increasing lure of call center service providers based in countries other than India, Kurup advises that the time has come for India to “think beyond outsourcing.” The country should begin to move from a destination for foreign software developers to outsource operations to save money and start investing in producing world class software development firms of its own.