Poised for growth in the medium term, the Indian business process outsourcing industry is likely to touch $12 billion revenue by 2006, credit rating agency ICRA said in its IT outlook report.

ICRA also expects the Indian BPO industry to employ 400,000 people by 2006, it said while adding the US backlash may act as an inhibiting factor for the growth of the Indian BPO industry.

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ICRA said even as the Indian BPO industry is poised for growth, a major inhibiting factor may be the potential US backlash due to the fear of job losses.

In particular, unemployment rate in the US during November 2003 was 5.9 per cent and much of this may be attributed to the declining opportunities in the US manufacturing sector, ICRA said.

Given the enormous importance of the services sector in the US, it is natural to expect that there will be strong opposition to moving jobs from the US and some US states have tabled bills that seek to ban the transfer of outsourced jobs to developing nations, ICRA said.

Even though the bills that have been tabled in the US refers to state government business getting outsourced, ICRA believes that the backlash may have a dampening impact on the BPO business in India.

As the global BPO industry grows, the developed nations (largest outsourcers) would probably have to suffer some amount of local job loss, the extent of which is not known as of now.

The size of the Indian BPO market was $1,475 million in FY 2002 and in FY 2003 it was $2,375 million, ICRA said.