Chennai: At a time when the American government is tightening its immigration rules affecting the Indian software engineers going to the US, the National Association of Software and Services Companies (Nasscom) has decided to follow the American strategy.

The Indian software industry's lobby body-hired the US based Evalueserve Inc, a full-service business research firm to produce a report on the benefits that the American economy could reap by favouring offshoring and outsourcing. It is a well-known American strategy to hire a consultant to produce a report that will further its business interests overseas.

According to the Nasscom report, outsourcing and loosening of immigration conditions are the two important ways that the US could cope with the expected labour shortage to tune of 5.6 million workers by 2010. Protectionism could cost the US economy up to $2 trillion, declares the report titled 'The Impact of Global Sourcing on the US Economy, 2003-2010'. The Nasscom report states that just 1 million workers will be affected because of the offshoring and they could be retrained and redeployed.

Says Nasscom president Kiran Karnik: "The report was commissioned to help understand the impact of information technology and increased globalisation on the US economy. A comprehensive analysis of economic parameters such as the GDP [gross domestic product], productivity and income levels was carried out to arrive at the projections."

The report outlines the cost-savings and increased flexibility that global sourcing will provide to US companies, thereby keeping them competitive in the global marketplace. At the same time countries like India supplying software engineers are also happy.

Forecasts for the US indicate an annual GDP growth of 3.20 per cent, which will lead to an increased demand for labour. However, the US will face a domestic labour shortfall of 5.6 million by 2010 due to an ageing population, which can potentially cost the US economy $2 trillion if appropriate measures are not taken well in time.

Highlights of the report:

• Over the next decade, the US economy will mirror the growth of the 1990s leading to an increased demand for labour. There will be a domestic labour shortfall of approximately 5.6 million workers by 2010 due to slow population growth and an ageing population.
  
• If the labour shortfall is not met, the US economy will lose out on growth opportunities resulting in an estimated cumulative loss of $2 trillion by 2010. Global sourcing in the form of immigration, temporary workers and offshoring can overcome this shortfall.
  
• For every $100 of call-centre work offshored by US firms, $143 is invested back into the US economy in the form of repatriated profits, increased sales of telecom equipment and cost-savings.
  
• Similarly, the amount invested back into the US economy (for every $100 of work) is $133 for IT services, and $142 for high-end knowledge services like equity research, underwriting, tax preparation and risk management.
  
• Offshoring of IT services has enabled US workers move to specialised and creative roles while moving process oriented programming to offshore locations. The proportion of specialists in the US IT workforce increased from 38 per cent in 1983 to 74 per cent in 2002.
  
• Utilisation of offshore facilities results in the growth of the local economies and an increase in the disposable income leading to the expansion of the global market for US goods and services. For example, in India the proportion of the consuming class in the overall population expanded from 14 per cent to 30 per cent in the 1990s and is set to reach 40 per cent in 2006-07. The Indian retail sector is expected to grow from $180 billion in 2003 to $300 billion by 2010.
  
• There will be a short-term impact on the US labour force. About 1.3 million jobs will move offshore between 2003-2010, impacting about 1 million US workers. Of these, about 0.7 million will be unemployed for a short duration. Over 8 million jobs are reallocated every quarter in the US economy and hence, the reallocation process will not be a strain for those who are temporarily unemployed.
  
• About 0.3 million workers will be unemployed for more than three months due to offshoring. This segment will require re-training and redeployment.