In a move that would hit Indian IT companies, America's Ohio state has prohibited spending of public funds for services provided offshore.

'No public funds should be spent on services provided offshore,' Ohio Governor Ted Strickland said in an executive order issued Aug 6 asking state officials to 'remain passionately focused on initiatives that will create and retain jobs in the United States in general and in Ohio, in particular'.

'Allowing public funds to pay for offshore services undermines economic development objectives and any such offshore services carry unacceptable quality and security risks,' said the order that came into effect Aug 31.

'Outsourcing jobs does not reflect Ohio values,' Strickland said. 'Ohioans have been among the hardest hit by more than a decade of unfair trade agreements and the trickle-down economic policies that promoted offshoring jobs at the expense of Ohioans who work for a living.

'We must do everything within our power to prevent outsourcing jobs because it undermines our economic development objectives, slows our recovery and deprives Ohioans and other Americans of employment opportunities,' he added.

The order does not specifically mention India, but Indian companies derive more than half their revenues from the US, and TCS, India's largest IT company, runs a project in Ohio. It employs 300 people and gets $19 million in tax credit for creating local jobs.

Ohio's move follows the passage of a Federal law to raise $600 million for enhancing security on the US-Mexico border with a steep hike for H-1B and L-1 visa fees for companies with less than half American employees.

The Indian government has threatened to take the US to the World Trade Organization (WTO) over what it considers a 'discriminatory law' as it would largely hit Indian companies unfairly.

(Arun Kumar can be contacted at arun.kumar@ians.in)