New Delhi will soon send a reminder to Beijing on the hurdles faced by Indian IT/ITeS firms in getting greater market access in China. This follows concerns raised by industry bodies Nasscom and CII in meetings with the Union government about the difficulties in qualifying for bids put out by Chinese government and state-owned enterprises (SOEs) for IT/ITeS projects.
In the aide memoire to be sent to China, sources said, India would also urge China to strengthen its intellectual property (IP) regime to protect Indian firms’ IP rights.
As per the 2013 Nasscom-KPMG study, of the estimated $46-billion Chinese IT/ITeS market, India’s share is less than $1 billion, despite its global reputation as a major export of IT-related services. China’s IT/ITeS market could cross $84 billion by 2020.
An aide memoire in diplomatic parlance means a note summarising in an informal manner (sans the usual courtesy phrases) the discussions between both sides. It is meant as ‘an aid to memory’, and a gentle reminder, seeking the necessary action on the points discussed. Indian IT firms operating in China include TCS, Infosys, Wipro, HCL, Tech Mahindra, NIIT (Education), Zenzar, Geometric, Mphasis, Mindtree, Birlasoft and KPIT.
In China, the government (at the federal and state/local levels) and SOEs are among the largest buyers of IT-related services. The Nasscom-KPMG study says by 2020 demand from SOEs is likely to be 45% of the total Chinese demand.
To qualify for bids of large projects, an applicant company needs to show that they have helped in the implementation of Chinese government/SOE projects of similar size. “We have suggested that China should ascribe more value to the experience of companies in government projects of similar sizes outside China, ” Gagan Sabharwal, director (global trade development), Nasscom said.
India had, on many occasions earlier and even during Prime Minister Narendra Modi’s recent visit to that country, taken up these issues with China. However, the fact that Beijing was yet to respond favourably to New Delhi’s concerns was recently discussed at a meeting held by the Indian commerce ministry, official sources told FE. The ministry then prepared the aide memoire and forwarded it to the Prime Minister’s Office to be sent to the Chinese authorities, they said.
Nasscom has also suggested that India and China should, on a reciprocal basis, allow easier movement of highly skilled professionals through long-term visas and work permits to enable Indian and Chinese companies to send across such experts to work in each other’s territory.
CII had pointed out that insistence on local entities in some provinces in China to avail subsidies was reducing competitiveness of Indian IT/ITeS firms. Besides, CII said, Indian IT/ITeS firms are facing challenges in staff mobility between provinces in China due to the ‘hukou’ system (a system of household registration that restricts internal mobility of people and ties their future prospects to their place of residence), necessitating local offices in each project area.
To showcase technological expertise of Indian IT firms, CII said certain pilot projects can be chosen to be jointly executed with Indian and Chinese companies. Also, both sides can jointly develop a platform on policy updates and business opportunities for Indian and Chinese companies, it said.
CII and Nasscom also want India to push for a totalisation agreement (on social security payments) with China. This, they said, will help avoid social insurance fees being paid twice by companies for Indian employees being deputed to China — once in India and then again in China. These industry bodies also want New Delhi to take up the issue of the lack of clarity in withholding tax imposed on repatriated profits. Among issues affected the Indian outsourcing firms, CII has pointed out resistance to outsourcing within China due to lack of understanding of benefits and perceived job loss fears in SOEs.
Entering the dragon
* Size of Chinese IT/ITeS market = $46 bn
* India’s current share = below $1 bn
* China’s IT/ITeS market size projected to be $84 bn by 2020
* Chinese govt & soes among potential big buyers of IT services
* By 2020, soes to make 45% of Chinese demand
* Indian IT majors in China: tcs, Infy, Wipro, hcl
* India seeks long-term work visas for IT workers in china
* Totalisation pact with china proposed