Contribution of India’s Tech Industry to the U.S. Economy

Indo-US bilateral ties are headed for exciting times. Over the last year, the Indian PM and the American President met on two occasions, an unprecedented record number of meetings between the two premiers. In distant past, the relationship with US had remained a chequered one, but things have looked up since the turn of the decade, and especially in the last 12 months, during which time the incumbent government made all attempts to strengthen the relationship, and to American government’s credit, they too responded amicably.

The growth trajectory – a confidence booster

Since the time Obama became the president seven years back, bilateral trade between the two countries recorded an impressive 56% growth. At that time, trade between the two nations stood at 66 billion USD, which by last year’s estimates had grown to a healthy 103 billion. Typically, enhanced investor confidence has been augmented by increased FDI in both countries. Indian FDI to US as of 2013, stood at USD 7.1 billion USD, while US FDI reached USD 24.3 billion USD. It is important to note that Indian FDI levels have almost trebled in the last 5 years. This relationship and growing trust between the two nations has been mutually beneficial, as we shall see.

As Indian tech companies in US leaves deeper imprints

The US geography, which accounts for the highest share in Indian IT, is a matured market. Much as it is difficult to quantify parameters like fueling innovation, reducing time-to-market, but even then it can be said with certainty, that by 2015, Indian IT companies alone through their US operations, have “supported” 410000 jobs and contributed more than 20 billion USD in total taxes. “Supported” would entail both direct and indirect employment. The three-year period (’11 – 14) saw jobs in US grow by 1.7 %, in comparison, tech jobs supported by Indian IT companies in US was six times that number.  Notably, jobs held by US nationals and green card holders during this time, grew at a 10% CAGR. In comparison, the IT industry too accounted for a 10% growth in the number of jobs supported. Indirect jobs generated – because of the multiplier effect – are mostly taken up by US nationals. States like California, Texas & Illinois which had the highest share of direct Indian tech jobs, had all shown high job growth.

Cumulative taxes paid by Indian tech companies over the period 2011-15 is expected to reach USD 22.5 Billion. In addition, cumulative contribution to social security coffers during the same period is estimated to touch USD 6.6 Billion in 2015.

Of the 59 M&A deals which matured in 2011 – 13, almost half of them were led by the IT sector. In that process, it was able to support more than 10000 jobs and create a favorable impact on the investment climate. There have been major contributions to CSR including, in healthcare, education and training- Leading Indian tech firms touched over 120,000+ American lives through CSR activities in 2011-13. Indian tech companies have made significant contributions to capacity building activities in science, technology, engineering and mathematics (known as STEM) areas. The revised statute resulting in increased visa application fee, enabled Indian tech industry to contribute over USD 375 million (FY2011-15) to Border Security Costs, and help America “secure its borders.”

contribution to US-1

 

Responding to critiques 

Unarguably, Indian IT has had a phenomenal run in US, and has been the target of many myths. Few falsely opine that foreign hires in tech, hinders local employment. This isn’t true at all. Over the last five years, if we compare the overall unemployment figures in US with that of tech, it will be seen that unemployment of tech professionals is half, as compared to the national average. Other rumors abound which has to do with wage levels, can be negated as well. Additional cost incurred on visa for foreign hires only make them that much more expensive, debunking the myth that foreign talent is being hired at lower salaries. The reality is that there is an acute skill shortage in STEM in US, to the tune of 445,000 jobs by 2022. Foreign hires will help fill this gap.

A collaborative approach, foreseen

The present government has laid down a very ambitious vision for the country. Digital India, Smart Cities, Make in India are all initiatives of gargantuan proportions and scope. It is an opportune moment for the nation to leverage this and partner with US in all these mega-projects. In a healthy bilateral relationship, both countries should mutually benefit from each other, and just as Indian IT companies have paved the way in US, it can be reciprocated by the American IT companies here in India as well.

11 out of the top 20 tech firms in India are US headquartered. That should say something about the scope for future. 

To know more, download our recently released FREE study- “Contributions of India’s Tech Industry to the US economy” from here- http://www.nasscom.in/contributions-india%E2%80%99s-tech-industry-us-economy

One Response
  1. Hebert

Leave a Reply

Your email address will not be published. Required fields are marked *


*