Depression Economics Article, 03/2009, Ganesh Natarajan   Succeeding in a depression   A TV talk show host in the US on Monday speculated whether we are experiencing a major recession or a minor depression as the news flow continues to be poor in every part of the world and the fortunes of both Wall Street and Main Street seem to be in free fall. The mood in Washington DC where a NASSCOM delegation spent three days speaking to Senators and their economic policy advisors on Capitol Hill and interacting with equally concerned associations like National Association of Manufacturing and Tech America was sombre. As one worthy rightly put it after listening to our eloquent logic in favour of free trade and anti protectionism, “Your logic is irrefutable but the free traders will have to wait till better news comes from the corporate sector and that does not seem likely to happen anywhere in the near future!” Daniel Thorniley of the Economist Intelligence Unit mentions key points that are causing uncertainty to policy planners in all developing markets and the dilemmas in India and also for the IT and Business services firms will surely resonate with his views. Put in five major buckets these concerns are…. 1) How deep and wide will the crisis be in the West and when will credit start flowing again? 2) Will Western banks support their subsidiaries and encourage lending in emerging markets when they have their backs to the wall at home? 3) What will happen to oil and commodity prices globally and which way will currencies swing? 4) When will the unemployment charts look a little better and what will be the fate of infrastructure spending around the world? With the spectre of protectionism coming in the way of global free trade, will companies outsource more or less to emerging markets during this time? While all the points have relevance for the immediate and medium term GDP growth in India the last point is what has the entire industry holding its breath. The logic of global competitiveness being increased thanks to global movement of work with the resultant reduction in cost and improvement in quality and innovation has been made many times Moreover, at a time when most major American and European corporations garner over half their revenues outside their home country, ranting and raving against the outsourcing of jobs and the tendency of global corporations to keep their money earned abroad in those countries rather than move it back and pay high taxes in their home country can at best be rhetoric that will resonate well in the minds of the domestic watchdogs but fly in the face of the essential logic of globalisation. The other issue that concerns most Indians working in the high tech industry is the tightening of immigration and the flow of visa holders particularly to the US. Two pieces of legislation that were introduced in the 110th Congress (the previous one) in the US and did not pass were the comprehensive immigration bill and a more specific one that that would limit the number of H1B visas available to companies to a percentage of their total employment. In meetings with the teams of Senate Majority leader Harry Reid who is widely expected to pilot the immigration bill this fall through the 111th Congress and the Durbin-Grassley Senatorial duo whose bill on visa limitations will hit the floor anytime soon, our sense is that while none of these are specifically targeted at the Indian knowledge worker community, this may well be the inadvertent outcome as a pro labour administration walks the tight rope between its focus on America and its desire to honour international commitments. The good news about American and British politics is that there is an inherent sense of fair play and the willingness to debate with an open mind which makes it possible for sound logic to be placed in front of bill creators and decision makers before during and sometimes even after a bill hits the floor of the house. The risk in these difficult economic times is that some phrasing gets introduced at the last minute like the limitation of compensation to financial firms who are receiving Government largesse to reconstruct their assets and this creates situations where legislation is approved without adequate debate simply because no politician would risk incurring the wrath of his home state constituency at a time of national crisis. Hence we must all necessarily stay on tenterhooks and be vigilant to do whatever is in our powers to preserve our cause – certainly an interesting time for our industry!       Back