Friday, May 15, 2009

What does Obama's tax proposal mean for India?

Eight days ago, when US President Barack Obama gave a seven-minute speech on the need to reform America's tax code, a full-scale panic immediately gripped India's IT sector.

Already sceptical of the new US president's alleged protectionist leanings, Indian business media agencies churned out headlines like 'Obama blasts Bangalore, favours Buffalo!' and 'Obama eager to tax outsourcing'. With their worst fears seemingly confirmed, many Indians found it easy to make the next leap in logic: Obama is anti-India.

But, as the dust settles around Obama's May 4 address, a more sober analysis of the situation reveals that perhaps America's youthful chief executive isn't so much anti-India as he is against overseas business loopholes and legal profit hiding.

So what exactly does all this mean for the over 2 million Indians whose livelihood depends on the IT service industry? examines Mr Obama's proposal, and several of the assumptions it has spawned.

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