In a move that augured well for India, Senate Republicans successfully blocked the passage of an anti-outsourcing bill that denied tax breaks to US companies which move jobs overseas, dealing a blow for President Barack Obama.
Republicans in a 53-45 vote blocked the bill which fell six votes short for passage. At least 60 votes were needed to clear the Republican procedural hurdle to the Democrat Bill which failed a key test.
The bill envisaged a ban on government contractors from using American taxpayers' money to move jobs offshore. As part of efforts to boost employment in the US, Obama is vigorously pushing to end the tax break for companies who ship jobs overseas saying it should go to firms who create jobs in America.
India, which already holds at least 50 per cent of the global outsourcing market, has become the world's back office as Western firms set up call centres, number-crunching and software development outlets to cut costs.
Democratic backers, who vow to make the vote a campaign issue in the November 2 Congressional election, claimed that Republicans have undermined their efforts to create jobs. On the other hand, Republicans and business groups dismissed the bill as a political stunt that would increase taxes on companies and undermine job growth.
In what is seen as an electoral populist move, the Creating American Jobs and End Offshoring Act aims at small manufacturers and included a payroll tax exemption for firms that move jobs to US, but the bill also contains provisions to prevent businesses from deferring US taxes on the income they make from foreign subsidiaries.
Indian IT honchos have maintained that the bill won't make much of an impact on India. However, they warned that US companies operating in other countries may be beaten by the same stick.
Several business groups such as the National Association of Manufacturers (NAM) were strongly opposed to the legislation. It had sent a letter to senators arguing the measure would make US corporations less competitive and hurt job creation.
Terming the bill as an election gimmick, Republican senator Orrin Hatch slammed the Democrats for their "height of irresponsibility" that would put the US economy at "greater risk." "Desperate times call for desperate measures and the majority is showing how desperate they are with a bill that increases the tax burden on job creators and ship much-needed US jobs overseas."
Hatch feared that "raising taxes on companies' overseas profits will just incentivize them to move their domestic facilities to another country... That is not the prescription that will cure our ailing economy."