In a move that could shake the foundations of India's IT services industry, US President Barack Obama on Thursday said he will end tax breaks to American firms that ship out jobs abroad.

"To encourage ... businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America," he said in his first State of Union address.

"Now, the House has passed a jobs bill that includes some of these steps. As the first order of business this year, I urge the Senate to do the same... People are out of work. They're hurting. They need our help. And I want a jobs bill on my desk without delay," he said.

India, which has earned the name 'world's back-office', could suffer the most by this move.

According to software services industry body NASSCOM, IT sector's revenue accounted for 5.8 per cent of India's gross domestic product in 2008-09, up from 1.2 per cent in 1997-98.

American companies primarily move jobs abroad to save costs, with no dent on services as countries like India boast of an English-educated workforce - be it IT engineers or for jobs that had to be done over phone.

"But the truth is, these steps won't make up for the seven million jobs that we've lost over the last two years," Obama said.