The ban comes after it was discovered that Parago Inc., a Texas-based company hired by Ohio Department of Development to monitor a rebate program for new energy-efficient appliances, used call center workers in El Salvador. This prompted Governor Strickland to pass this order, in a bid to pre-empt further use of public funds for offshore services. States such as Virginia are also facing a massive backlash against outsourcing. West Virginia Public workers Union, last week filed a lawsuit against proposed outsourcing of IT jobs by the state’s office of technology. Ohio’s move adds to the perception that it involves serious loss of jobs. They are now making serious efforts to hire more Americans and keep much of the work stateside.

Offshoring work to India is a $50-billion industry and Indian tech industry has benefitted immensely from American firms wanting to take advantage of its low wages and top-quality skills. However Ohio governor Ted Strickland, last month commented on the pervasive service delivery problems, including dissatisfaction with the quality of offshore providers. He said that the purchase of offshore services with public funds undermines economic development and other job creation objectives.

“One of the keys to job creation is to encourage companies to invest more in the US. But for years, our tax code has actually given billions of dollars in tax breaks that encourage companies to create jobs and profits in other countries,” Obama said in his speech on economy at Cleveland, Ohio. It may be great for domestic politics in the US, but for India it’s poor timing.

Other US state governments are also increasingly pushing for legislations aimed at creating more local jobs, as they cope with high unemployment rates of almost 10%.  They say, job creation here, is the top priority

This was told by Commerce and Industry Minister Anand Sharma at a press conference at the Willard Intercontinental Hotel in Washington after his meetings with US Trade Representative Ron Kirk and Commerce Secretary Gary Locke.

Mr Sharma said “About 100 Fortune 500 companies have their research and development hubs in India and 220 of them source their software from India. Don’t forget India has a huge information technology industry, (so) where does the hardware come from”

“That’s why any protectionist barrier is dangerous,” Sharma argued.

He said, “Indian industry in the five preceding years has invested over $106 billion in the US and created 300,000 jobs. IT industry alone has created 250,000 jobs in America.”