Indian BPO sector: Call diverts to China, Sri Lanka ahead?

The Indian outsourcing industry might soon get a taste of its own medicine. The industry is now afraid of losing jobs to countries like China, Sri Lanka, the Philippines and South Africa where governments are handing out tax breaks, while Indian companies reel under the newly announced MAT, reports CNBC-TV18.



As of now, the Indian outsourcing industry is losing only sleep, but the time might not be far when it loses jobs as well. The BPO sector says the new tax announcements of Fringe Benefit Tax on ESOPs, 12% on rental space and 11% MAT in this year's Budget has made the Indian industry less competitive globally.



Raman Roy, Chairman and Managing Director, Quatrro, said, “We face the risk of losing our first-mover advantage. These policies are making us less productive in comparison to other countries.”



On the other hand, China, Sri Lanka, the Philippines and South Africa want a slice of the outsourcing pie. Sri Lanka offers a 15-year tax holiday, while Philippines and China offer a 10-yr tax holiday each. Most of their governments offer 10 to 15 year tax breaks and China even offers BPO employees an income-tax holiday.



Promod Bhasin, President & CEO, Genpact, says, “Countries like China, Romania, South Africa and the Philippines offer better incentives. I have told my people, if China becomes more cost-effective, I will be the first one to move.”



Industry sources say Nasscom has made representations to the Prime Minister and Finance Minister on behalf of the USD 9-billion Indian BPO industry, but has little hope of a rollback. It might now lose expertise to newcomers.