Digital Economy/IT

Members Only

India and the United States are leaders in the digital economy. USIBC has been instrumental in fighting U.S. protectionist legislation that would thwart the "flatter world" economy emerging between our two countries. The atmosphere on Capitol Hill and in many state capitals against global sourcing is deteriorating.

Not enough is being projected about how India's economic growth is actually generating employment and opportunity here at home. Bharti's recent global sourcing contract with IBM valued at more than $1 billion, and Air India's recent acquisition of $11 billion worth of Boeing aircraft are but two examples.

What is becoming more apparent each day is the magnitude of opportunity that exists for both sides as the digital economy continues its convergence. Continued cooperation is necessary to realize the full potential of software engineering and programming, value added Business Process Outsourcing, and the attributes of Information Technology-Enabled Service partnerships.

The U.S. side can contribute to this opportunity by adopting a rational policy that enables the ready movement of technology professionals between our countries, and by resolving a totalization agreement that reimburses social security taxes to individuals who have no intention of residing in the U.S. and benefiting from social security benefits. On the Indian side, labor reforms supporting contract labor, registration of workers to ensure data security, and the development of educational policies that will assure a future workforce of highly skilled technology professionals are USIBC priorities.

USIBC's Executive Committee on Digital Economy/IT is focusing on several objectives for 2011, including:

• IT Act Implementation: Continue broad engagement with the Government of India to ensure that future regulations implementing the IT Act and 2008 Amendments are transparent and conform to international norms and best practices.
  • Ensure that the GOI applies international best practices to encryption policy by raising India's encryption level to 128-bits at a minimum with no requirement for encryption key deposit or plain text translations for ISP acting as mere conduits.
• Tax Policy :For India to remain cutting edge and globally competitive, a predictable tax environment must be the norm, not the exception – with a transparent Alternate Dispute Resolution mechanism in place to quickly remedy conflicts. India's ad hoc application of Permanent Establishment rulings and Transfer Pricing assessments are eroding India's competitive edge. USIBC will work with the Government and other key stakeholders to:
  • Lobby the GOI to treat transfer pricing and permanent establishment principles in-line with international best practices, both in terms of transfer pricing mark-ups and the definition of what qualifies as a permanent establishment.
  • Push for the establishment of Advance Pricing Mechanism to provide clarity and security to foreign firms on their future tax liabilities.
  • Reduce customs duties and excise on IT hardware and software, including hidden duties that add costs to bringing IT products to market.
  • Press for the extension of the Software Technology Parks of India tax incentive.
  • Press for Service Tax rationalization, including CENVAT for service tax paid on transactions with Affiliates; software being double taxed as a service and as a good, and delays over Service Tax refunds.
• Corporate Governance: Satyam's accounting fraud of $1 billion has been a "wake-up call" for the Indian IT/BPO industry, providing an opportunity to press India to adopt tighter corporate governance standards. In 2011, USIBC will be at the forefront suggesting measures that elevate India's corporate governance and transparency standards.
• Labor reforms: Engage with the GOI at the Federal and State level to develop more flexible and business-friendly labor laws related to the ICT sector.
• Visa Policy: USIBC will work more closely with the Compete America and other associations to press for visa reform as part of the wider efforts to reform America's Immigration regime. USIBC will work with key stakeholders to advocate for the liberalization of the movement of high-technology professional persons (Mode IV) between our countries, the creation of a high-tech visa to enable greater bilateral collaboration, and a reform and expansion of the existing H-1B Visa program.
  • In the United States, USIBC will work with industry and association partners to oppose legislation that would deny America's ability to draw upon the best talent from around the world.
• Spectrum allocation: Ensure that U.S. companies are able to fairly compete in the 3G Auctioning process and are not disadvantaged in the future allocation of spectrum.
• Competition Commission: Anti-Trust legislation being formulated in India must be consistent with International Best Practices and must not damage investment flows between the two countries. Close coordination with the U.S. Chamber of Commerce and engagement with the Indian authorities as India's Competition Commission (Dhanendra Kumar) takes shape will ensure continued engagement between Indian and American companies on a "level-playing field" basis.
• Information and Communications Technology (ICT) Dialogue: Building on the highly successful December USIBC mission to Delhi, USIBC will work with member companies, TIA, Tech America, and the U.S. and Indian Governments to plan and execute future meetings in Washington and New Delhi.

Telecommunications

USIBC will continue to urge the government of India to continue to develop, implement, and enforce laws and regulations that provide new entrants the assurance that they can compete on a fair and equitable basis in the Indian ICT telecommunications market.

In this regard, we work with the GOI in achieving the following public policy goals:

• Increase India's Foreign Direct Investment Limit to 100%: perhaps under the US-India BIT.
• Encourage the Creation of a Level Playing Field: e.g., through consistency in the application of license fees.
• Promote Regulatory Clarity and Transparency in Licensing Processes and Procedures: particularly as it relates to the scope of resale authority by licensed facilities-based operators.
• Promote Regulatory Certainty: encourage approval by DOT of TRAI's August 2008 Recommendations to liberalize VoIP services.
• Create an Environment That Encourages Investment: extension of India's STPI tax holiday.
• Promote Competition: apply reasonable mobile termination rates.

In all of these efforts, USIBC will increase coordination and cooperation with other industry associations, including Tech America, Coalition of Service Industries, the Telecommunications Industry Association, NASSCOM, DSCI, FICCI, and CII.

Secretariat: Michael DiPaula-Coyle, USIBC
Committee Chair: Joseph Alhadeff, Oracle

Human Resources and Education

USIBC-member companies appreciate India's significant pool of human resource talent that will sustain India's continued economic growth, and which will champion in the coming decades the convergence of our two dynamic economies. That said, both U.S. and Indian companies are already experiencing high attrition rates amongst workers within various industry sectors. There is concern that shortages of qualified professionals may soon become evident, threatening India's competitive advantage and constraining India's growth potential. To address this potential human resource challenge, USIBC —- in the near- and mid-term —- will seek to play a supportive and facilitating role pairing U.S. companies and educational institutions with Indian counterparts and universities. The objective will be to support educational programs in India and the U.S. that better prepare our professionals to do business with one another. The concept of supporting curriculum development and making accessible senior business executives to the development of sector-specific, accredited "finishing schools" and/or "executive management" programs will be pursued. USIBC will work with partner organizations to lend credibility and expertise to such programs.

India's economic rise should result in the measurable increase in quality education —- able to serve India's domestic and global industrial goals.

• Work with counterpart organizations and educational institutions in India and the U.S. to determine the feasibility of supporting finishing school programs and/or executive management programs
• Work with the National Association of Software and Service Companies (NASSCOM) and other associations to track the human resource challenge as it affects the growth of the global IT Enabled Services (ITES) Industry