India's leading software trade body has warned that protectionism in key markets could affect the growth prospects of the country's outsourcing industry.

Although market conditions are improving, the industry has to watch out for protectionism in some of its key markets, Pramod Bhasin, chairman of the National Association of Software and Service Companies (Nasscom) said at a conference in Mumbai, according to media reports.

Nasscom forecast last week that India's exports of software services and business process outsourcing (BPO) are likely to increase by 13 per cent to 15 per cent in the fiscal year to March 31, 2011. In the year to March 31, 2010, it is expected to grow by 5.5 pe rcent to US$50 billion.

Indian industry is however worried by protectionism, in the US for example, which has suffered a high number of job losses as a result of the recession.

President Barack Obama said in January in his State of the Union Address that it is time to slash the tax breaks for companies that ship US jobs overseas, and give those tax breaks to companies that create jobs in the US.

In both the US and UK critics charge that Indian outsourcers replace existing staff on customer sites with those sent from India.