Globalization

Globalization has allowed various countries to trade their goods and services with those of other countries; this globalization effort has assisted many countries, especially those that have a history of struggle. "Globalization refers to the shift toward a more integrated and interdependent world economy (Hill 6)". This integration and interdependence has been part of the reason for growth in normally struggling countries, such as India. "International trade occurs when a firm exports goods or services to another country. Foreign direct investment occurs when a firm invests resources in business activities outside its home country (Hill 11)." Globalization which includes international trade and foreign direct investment create high levels of interdependency between countries. Such interdependence has caused the rest of the world to suffer as the U.S. suffers. This "domino effect" has hurt other economies almost to the point of extinction such as Greece. Inclusively, India, although a growing economy, has been an unintended target by the downward spiral of the U.S. economy.

In the article filed by Bloomberg August 2010, India has fallen victim to the U.S.'s attempt to cut costs where ever possible by the Obama Administration. The issue between India and the U.S. involves outsourcing which accounts for a high percentage of India's economic growth. In August 2010, Indian officials began to criticize a new outsourcing fee proposal passed by U.S. Senators. This proposal almost doubles the fee on visas for Indian IT workers coming to work in the U.S. (Einhorn, par. 1). The fee restricts IT workers in India from working in the U.S. because companies may not be able to afford it. Indian Trade Minister Anand Sharma has been in contact with U.S. Trade Representative, Ron Kirk. Sharma calls this proposal a "highly discriminatory... and inexplicable [proposal] to [Indian] companies to bear..." (Einhorn, par. 1).

Normally, a country such as the U.S. will outsource its services to another country, such as India. However in this case, the U.S. contracted India's highly-skilled workers to work in the U.S. in an attempt to help cure U.S. companies of their general debt. Companies avoiding to pay highly-skilled American workers would lower their output of funds since American-worker pay would be significantly higher than wages for an Indian worker. India's workers may get paid lower salaries if coming from India to take over jobs in the U.S. but it helps India's expansion into new territories, which can then help Indian IT companies grow into massive conglomerates such as IBM. There is a void to be filled with a new generation of companies in the U.S. "...the leading Indian companies compete directly with the likes of IBM and EDS for large software development projects, business process outsourcing contracts, and information technology consulting services (Hill 18)." Right now, there is a chance for other companies around the world to imprint their mark in the U.S. market, and these high fees are causing this gap to become slimmer. In this case, it is India who is providing foreign direct investment and international trade into the U.S. This phenomenon was unheard of several years ago, as nobody would have thought that a developing nation would ever have the power to direct such initiatives.

The graph (left) shows India's FDI growth rate from 1990 to 2008 in comparison to its GDP growth rate. Although its GDP growth rate has been less in the past few years than in the early 1990's, its FDI growth has been booming due to India's private sector. India's private sector contributes over three-quarters of India's GDP (Asnani, par. 7). Its private sector has been booming mainly because of information technology, where global spending will rise from $193 billion in 2004 to over $250 billion by 2010 (Hill 18). These initiatives can now be driven by developing nations because, "the economies of the world's nation-states are becoming more intertwined. As trade expands, nations are becoming increasingly dependent on each other for important goods and services (Hill 13)." This interdependence can be clearly seen in this article, where Indian IT companies will not stop sending their workers to the U.S. even with the high fees involved. Without the ability to bring Indian workers to the U.S., Indian companies can lose market share in India and also lose investor confidence.

Although Indian companies may suffer through this new proposal, the article states that the U.S. is doing this to benefit our economy after the economic crisis left many of our citizens jobless. The article states that even if some in the Obama Administration tried to reverse this fee for Indian companies, the effort would be short-lived as they would not try to go up against the Senate, where the consensus to charge less for H-1B or L-1 visas would be a rare decision (Einhorn, par. 2).

This new proposal has also hurt investor confidence in these companies. Indian IT companies such as Infosys, Tata Consultancy Services, and Wipro, which are "...some of the fastest growing software service companies on the planet... (Hill 18)", had stock prices that showed dramatic downward spirals as investors heard of this news (Einhorn par. 2). "Infosys... has annual revenues of $22 billion and some 60,000 employees... [The IT industry in India, with] combined software services, hardware sales, and business processes [accounts for] outsourcing exports [which are] expected to hit $47 billion, a 16 percent growth rate despite a global economic slowdown during 2008-2009 (Hill 18)." The price hike for these visas is an additional $2,000 per worker, but Indian companies will still keep sending workers as long as they can (Einhorn, par. 2). Companies like Infosys who are having high expansion rates cannot afford to halt expansion and revenue even with fee hikes in the U.S. (which is India's biggest customer). The graph (left) gives measurements of how successful Tata Consultancy, Infosys, and Wipro have been in the past five years alone, due to the U.S.'s high interest in outsourcing to India (Fontella-Khan, par. 8). Interestingly enough, the problem with this proposal is more than just the fee Indian companies will incur, but it also has to do with what this leads to in terms of other rich countries following suit, "...expect more of these measures... from every European market in [the] future," says Sudeshma Sen, a writer for the Economic Times (Einhorn, par. 2). Sen goes on to write that the problem is not against any discrimination, but instead it is based on the economic instability of the U.S. where high unemployment rates and illegal immigration have led to urban myths being developed. One of these myths is that Americans think that jobs obtained