New Delhi: Stung by the US action of passing a law to ban outsourcing of Government contracts to companies outside US, India today (Jan 24, 2004) termed the move as against the spirit of global trade, with Information Technology (IT) Minister Arun Shourie saying this was not the way Washington could advance in the backdrop of multilateral trade negotiations.

"I feel this would worsen prospects of multilateral negotiations in trade," Shourie said from Davos while advising the Indian companies to diversify their markets.

Clarifying that India did not do much of the outsourcing business on US Government contract, he said, "So the direct effect would be little and Indian IT companies must learn some lessons from such moves.

"We must continue to move up the value chain and evolve such solutions and services, which are good and cost-effective and Indian IT companies must diversify to other markets," Shourie said.

Giving an example of diversification, he said the German IT market is $ 66 billion in size and India's trade with them is just $ 250 million.

On the next course of action from Government to counter this, Shourie said, "The real action has to come from the firms who avail our services and they must know the consequences on their competitiveness if they are not allowed to outsource."

Shourie said the move by the US Senate was an "important symptom".

"It may have implications on the chances of similar bills being passed by eight US States," he said.

At present, eight US States have introduced Bills in their legislatures relating to outsourcing.

In the first Federal law against outsourcing, the US Senate on Thursday (Jan 22, 2004) passed a law barring doling out sub-contracts to India and other countries by American companies to cut their costs.

The legal measure, originally sponsored by Republican Senator from Ohio, George Voinovich, and others, was included in a $ 328 billion spending Bill passed by the Senate.