If indeed, US President Donald Trump is successful in pushing the stringent HI-B visa norms, Indian IT majors are sure to face a setback. They must start re-working their economics and look for ways to bring down on-site work
India’s Silicon valley in Bengaluru and Hyderabad’s cyber city, India’s IT hub, are shivering with uncertainty about their future if the US blocks H1-B visas as a part of curbing outsourcing. India’s software service industry, which is already facing pressure on profitability, is braving to face the Trump Administration’s protectionist policies. The National Association for Software and Services Companies (Nasscom), which represents the IT industry, has kept its fingers crossed.
US President Donald Trump made his intentions clear during his inaugural speech. He said, “We will follow two simple rules: Buy American and hire Americans.” Fearing protectionism, India has been lobbying with the Trump Administration to spare them their H1-B visas. A Nasscom delegation had been to the US recently. Indian officials led by Foreign Secretary S Jaishankar also visited Washington to lobby with the Trump Administration. The Indian argument is that the HI-B visa is a “category of trade and services” which actually helps the American economy be more competitive.
However, Trump decided to halt expedited processing of H1-B visas last week. This shocked the IT industry. Even as the Indian officials were claiming that their forceful presentation to the Congress and administration had met with a degree of understanding, the US Citizenship and Immigration Services brought the axe down on the expedited processing system which many Indian and American companies use to facilitate the entry.
The US Government announced last week that as of April 3, it will suspend the “premium processing” option , which ensures an application will be reviewed within 15 days at a cost of $1,225. The order came a day after visiting Jaishankar met John Kelly, the US Secretary of Homeland Security, and raised the visa issue. The suspension may directly hit Indian IT majors like Infosys, Wipro and Tata Consultancy Services .
What is H1-B visa and why is India concernedIJ It is a type of visa that allows the employers to bring skilled workers from abroad to the US, which would in turn boost the US economy.
Indian IT companies use H1-B visas to fly their engineers to the US to service the clients. While tech firms claim they use the H1-B visas to hire highly skilled workers, some US politicians complain that IT companies misuse and bring low-level IT workers to the US.
New Delhi’s is worried because India wants more H1-B visas to boost its IT industry, which is vital for its growing economy. The IT sector contributes 9.3 per cent to India’s GDP and employs of 3.7 million people. The US accounts for more than 60 per cent of India’s $108 billion in foreign technology and outsourcing sales last year, according to the National Association of Software and Service Companies.
Even before the visa freeze, IT majors in India reported slow growth last year. Uncertainty about the future has led to a fall in employment. The US lawmakers have introduced the lofgren Bill, which proposes the minimum wages be doubled to $130,000. The current H1-B minimum wage of $60,000 was fixed in 1989. Most H1-B visa holders get an average of $1,00,000. This hike in salaries will reduce the flow of Indian IT workers to the US . The draft Bill aims to make it difficult to bring foreign workers.
The US receives nearly three lakh applications and issues visas through lottery system. last year about 85,000 visas were given out. Around 60 per cent of them are granted to Indian IT companies. An estimated one million jobs are vacant in the US in the IT sector.
Of the 12 lakh jobs certified for H-1B visas in 2015, Indian IT firms accounted for 2.54 lakh positions. In 2016, it was 1.72 lakh, as per US labour department records. The Nasscom predicts that the IT sector will grow at the lower end of its revised target in fiscal 2017.
So, are things really going to be hard for IT majorsIJ Are Indian companies ready to face the blowIJ More importantly, are the US firms ready to do without outsourcingIJ If Trump pushes the stringent HI-B visa norms, Indian IT majors are sure to face a setback and they must explore ways to soften this blow. They should re-work their economics and look for ways to bring down on-site work.
First, they should adopt a new model of business. At present, most of them have business in several places, but do not pay taxes. Second, as the Infosys mentor NR Narayana Murthy has suggested, IT companies should employ local Americans even if they have to pay higher salaries, and even if it reduced their profit margins.
Third, is to diversify their markets beyond the US to other countries. But it is not easy. Fourth, is to see how the changes would affect the Indian IT industry the least by lobbying with the Congress and Foggy Bottom. IT majors are hopeful that during his bilateral visit later this year, the Prime Minister might try to soften the blow. But it is an uphill task.
(The writer is a senior political commentator and syndicated columnist)