Obama fears India's rise.

No matter what the hype and the pedigree; most politicians know how to appease their voters when pushed to a corner. In recent times, US president Barack Obama has faced political setbacks and increasing criticism over his leadership. Hence, the content of his annual State of the Union address does not come as a surprise.

The key takeaway for us here in India is his statement, "To encourage ... businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America." That clearly has implications for the Indian IT industry. Little wonder then, the top losers among the index heavyweights in India today were from the software pack. So far, the mood among the Indian software giants seems optimistic. US tax breaks aside, American companies will continue to need cost effective services. The key question is whether Indian service providers can remain competitive even after taking into account the higher taxes their clients must pay. In our view, Indian IT companies will still get business. They continue to provide compelling value. They have also taken steps like increasing their presence overseas and hiring locals there.

On a broader note, Obama also noted that countries like India were "not standing still... They are putting more emphasis on math and science. They're rebuilding their infrastructure. They're making serious investments in clear energy because they want those jobs." In our view, this is an admission of the progress we have made in the past several years. There is no mistaking that we have years of catching up to do. But we can take heart that things are moving in the right direction.