March 6, 2009 / 1:12 PM / 10 years ago

India renews criticism of "Buy American" drift

NEW DELHI, March 6 (Reuters) - India’s finance minister said the Obama administration’s massive stimulus plan will restrict trade and weaken efforts to beat the global slump, renewing criticism of what it considers a drift toward protectionism.

The U.S. government’s $787 billion stimulus package, which was signed into law last month, aims to pull the world’s largest economy out of recession and protect jobs, and includes billions of dollars for public building projects.

But a “Buy American” clause insisting firms use U.S.-made goods for public works and building projects funded by the stimulus package and a speech in which U.S. President Barack Obama said he would seek to end tax breaks for firms which outsource jobs have alarmed New Delhi.

“The U.S. government’s stimulus package imposing restrictions on public procurement or discouraging U.S. firms from outsourcing or restricting hiring of foreign workers is not in keeping with the spirit of global cooperation,” Pranab Mukherjee said at a business conference.

“That the biggest economy in the world, the United States, where this global financial tsunami originated, should be resorting to trade-restrictive practices is particularly disturbing,” he said.

“This is a negative trend and is likely to have a cascading effect in other major economies and, thereby, undermine the global efforts to overcome the current crisis in the shortest possible time-frame.”

Concerns about protectionism are rising as the impact of the global financial crisis spreads, increasing the temptation for governments to bring in measures that will help their firms in the short-term but worsen the overall economic pain.

A tenth of India’s exports head to the United States, from where the country’s software services and outsourcing firms earn more than 50 percent of their revenues.

India’s exports slumped an annual 16 percent in January, its fourth straight fall, and trade officials say the contraction is likely to continue until the end of March.

Job prospects for Indian software professionals abroad have also dimmed as recessions in matured economies deepen.

On Thursday, India’s No. 2 software services exporter Infosys Technologies Ltd (INFY.BO) said it was seeing a slowdown in getting new outsourcing contracts as the global slump has hit customers’ budgets and put pressure on prices. (Reporting by Rajkumar Ray and Rajesh Kumar Singh, Editing by Mark Williams)

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