"Such moves are vitiating the environment as it is tantamount to denying market access in an area in which India has core competence," he told reporters.

"Bringing in such legislation interferes with market forces," he added.

New Jersey, Maryland, Connecticut and Washington have been considering stopping outsourcing their government information technology (IT) work.

Jaitley said the only silver lining was that US Trade Representative Robert Zoellick had told him during a recent meeting in the United States that the federal government was opposed to the move and called it "bad policy."

The federal government should not silently watch developments, but ought to dissuade states from implementing any ban, he added.

The move would mean the United States was practising the opposite of what it preached in multilateral forums where it argues for greater market access and free trade.

India's IT industry has been worried because such a ban would have a direct impact on one of its fastest growing business areas.

The outsourcing sector grew about 60 percent in the year to March and is projected to surge by 55 percent to 3.6 billion dollars in the current financial year.

Last year the business process outsourcing sector accounted for about a quarter of the total revenue of the information technology sector in India.

SPACE.WIRE