The undercover operation by a reporter of the British tabloid The Sun which claimed to have purchased confidential data on its citizens "from crooks in Indian call centres" is exactly what protectionist lobbies in the US and Britain need to strengthen their opposition to work being outsourced to emerging powers like India and China.

This sentiment was earlier fanned when accounts of US-based Citibank customers suffered a theft over a security breach at a call centre in western India in April. Such incidents are being played up to besmirch the reputation of a rising global power in information technology (IT) and IT-enabled services.

What is not recognized is that such cyber crimes can and do happen anywhere in the world. There is hardly a single country - the UK and US are no exceptions - where crooks don't break the law in cyber space. India hardly has a monopoly on crooks in call centres! The main issue is that the perpetrator of this cyber crime has been identified and must be prosecuted under the laws of the land.

In its aftermath, none other than India's Prime Minister Manmohan Singh urged the IT industry to "ensure that any breach of secrecy, any illegal transfer of commercial or other privileged information and any form of cyber crime is made a punishable offence." The fact that this particular cyber crime drew the attention of the government at the highest level itself tells a story of its own.

Manmohan Singh is due to make an all-important visit to the US later this month. Even though it is unlikely that such a matter will be taken in the talks on data security in the next meeting of India-US High Technology Group, the fact remains that India is rather sensitive to the growing protectionist mood in the developed world. Hence, the prime minister's call for harsh data confidentiality norms which conform to the highest world standards.

Fears of a US protectionist backlash were reportedly behind India's state-owned carrier Air-India's decision to favour Boeing over Airbus for the purchase of aircraft worth $7 billion. According to The Financial Times, this was hinted at a background briefing to the paper by a senior government official. The Boeing deal was linked to Washington's repeated calls to New Delhi to ensure a "level playing field" for its industry since it has been "grousing" that while Indian IT services exports to the US has been surging, India's manufacturing imports now come mainly from Asia and not the US. As the US never likes this kind of trade imbalance to last, it begins to flex its muscles!

Besides India, the world is also witness to America's protectionist backlash against China. The case in point is the stated-owned oil giant China Offshore Oil Corp's (CNOOC) bid to take over California-based Unocal. This has proved to be highly controversial as the US House of Representatives overwhelmingly voted to block this big-ticket deal on national security grounds.

During the 1980s, similar feelings were raised when Japanese investors purchased prestigious properties like the Rockefeller Center in New York and some large Hollywood studios. The heart of the matter is US' growing trade imbalance with China, hence the muscle flexing over the Unocal takeover bid by the dragon.

This sort of behaviour may sound anomalous in an era of globalisation, but India - including China - cannot afford to ignore American sensitivities either. It is the world's sole superpower and has offered help in making India a world power as well in the 21st century.

Given the stakes involved, India's IT and IT-enabled service industry must get its act together and ensure that our cyber laws match the highest standards in the world. Given the brand equity that India has built up as a global player in this business, the industry must maintain continue to high standards of quality, and also pay equal attention to confidentiality and reliability.

While all of this must be done in national interest, a sense of perspective is also necessary. For the entire furore over the The Sun expose has generated, this business must not be blown out of proportion.

Globally, Off-shored IT services, which entails farming out tasks such as customer services and transaction processing to a separate company, generates revenues worth of only $45 billion annually - which is less than 10 percent of the world's exports of business services. The US and the UK, incidentally, are the biggest net exporters in this business according to the latest annual report of the World Trade Organisation (WTO).

While the popular perception in the developed countries worries over the loss of jobs due to off-shoring, the WTO reports says this is not reflected in actual production, employment or trade patterns. In India, some 800,000 people are engaged in offshore IT business - worth $5.7 billion - which works out to only 0.25 percent of the country's 320-million-strong workforce.

There is also no evidence indicating any dramatic impact of this business in the either the sending or receiving country. The point, however, is that such evidence has not headed off the growing protectionist backlash in the developed countries.

In this milieu, concerns over data security might only reinforce the strong popular mood regarding off-shoring and inhibit the US and UK-based companies from outsourcing more to countries like India. This brouhaha triggered by UK-based tabloid must, therefore, not be allowed to get out of hand.

This is where Manmohan Singh's call to the IT industry to get its act together and tighten its cyber laws must be taken seriously. Heading off a growing backlash against outsourcing in the US and UK is the need of the moment.