A call center in India. New U.S. policies against outsourcing jobs overseas will hurt India's IT sector the most. Photo: David Robinson (flickr)

In spite of the global recession's painful effects on most of the world's economies, India has managed to stay stable. The country even expects its economy to grow by 5 percent this year. However, this prediction came before President Obama announced that his administration would be cutting tax breaks and refusing bailout money for companies outsourcing jobs overseas.

Rising unemployment in the U.S. has renewed the political and economic debate over shipping jobs abroad. More than 1,000 U.S. firms that have outsourced jobs abroad are being criticized for taking jobs away from Americans. Countries like India — which gets more than 60 percent of its outsourcing work from U.S. businesses — will likely be hit the hardest by the Obama administration’s protectionist approach to reviving the U.S. economy.

President Obama also announced a hiring ban on foreign workers for companies receiving federal bailout money. Of the 65,000 H1-B work visas that the U.S. issues annually, 21,667 have been for Indian citizens who mostly join the information technology industry. These non-immigrant visas are granted to educated and skilled foreign workers.

But the U.S. is not alone in adopting policies against outsourcing jobs and limiting foreign workers. In Persian Gulf countries like the United Arab Emirates, millions of Indians who are employed in the construction and banking industries have been laid off and forced to return home. In the United Kingdom — where Indians are one of the most prevalent immigrant groups — the government has announced plans to potentially limit foreign workers to sectors of the economy that have documented labor shortages.

New policies against hiring foreign workers in the U.S. may have a long-term impact that policymakers are not anticipating, according to a study by Duke and Harvard researchers. With increased job opportunities in places like India and China, more than 100,000 foreign workers could leave the U.S. for jobs in their home countries. The study found that many Indian professionals in Silicon Valley have already left, and predicts many more will leave to start businesses in India.

This is bad news for the long-term economic recovery of the U.S. because nearly half of Silicon Valley start-ups, including Google, were started by immigrants, the lead Harvard researcher tells BusinessWeek. This long-term “brain drain” will mean that “when we start recovering ... the people we need are going to be in India and China,” according to the researcher, Vivek Wadhwa.

The U.S. has historically welcomed immigrants and their innovative ideas. A reversal of policy could prove to be very harmful — hurting economic growth and limiting the expansion of key industries.