India Inc described the US President Barack Obama's announcement to punish American firms by levying high taxes on their outsourcing business as "protectionist" and a retrograde measure that, it said, will hurt the US companies.

"Taking measures that would force companies to restrict their economic activities in one vision and not in the other is a retrograde step," the Federation of Indian Chambers of Commerce and Industry (FICCI) said.

FICCI President Harsh Pati Singhania said while Obama's move would have some impact on the US investment abroad and into India, in the long run this would only run counter to the interest of US corporations seeking global presence.

Obama had said on Monday that the US would stop letting American firms which create jobs abroad take deduction on their expenses in their tax liabilities.

"It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York," Obama said.

Criticising the US President's announcement, Assocham President Sajjan Jindal said, "Taking resort to protectionist tendency will kill the spirit of competition... and dilute the spirits of WTO."

He said an American survey recently found that the US benefited ten times more than the countries where it outsourced jobs.