Visa move: threat to IT industry

The rising headwinds in the US against outsourcing of jobs to foreign nationals have posed a serious threat to India’s Information Technology (IT) industry. Major Indian IT companies which have much of their business in the US have to grapple with the problem in the coming months. Outsourcing has figured negatively in the US political campaigns for many years. But a combination of executive actions and legislative moves after the new Trump administration took over last month has made the threat real and immediate. The likely changes in the H1B non-immigrant visa programme, on which the outsourcing work is based, would make Indian IT companies’ business in the US extremely difficult or unviable. A proposed executive order of the administration and two bills introduced in Congress with bipartisan support have many provisions to tighten the conditions for grant of skilled visas.

The minimum salary of H1B visa holders is proposed to be more than doubled to $130,000. This will make the visas costly for companies and outsourcing will no longer be cheap. The Obama administration had granted an extension of stay for foreign graduates. This may be reversed. This will make it difficult for students to continue to live and work in the US after completion of their studies. The L1 visa programme which facilitates intra-company transfer of visa holders will be strictly monitored. There is also a proposal to replace the existing lottery system of visas  with one based on petitions for jobs that pay the highest salaries. All this can seriously affect the business activities and opportunities of Indian companies. Since 70% of H1B visas go to Indians and about 65% of Indian IT companies’ business is from the US, the impact of the steps on the companies will be severe. American companies, especially technology majors like Microsoft and Google, will also be affected. The American economy too will suffer because jobs will become expensive, and many Americans may not be available or willing to do the work which would otherwise be outsourced. The protectionist administration may not admit it now but may realise it sooner or later.

India’s IT industry should take it as a challenge. It should have done de-risking through geographical diversification during the high-growth period itself. The companies should also think of changing their business models and adopt innovative strategies to stay in business and make themselves relevant in the emerging adverse environment. They can hire more local workers in the US or bring more work offshore to India. They may also have to shift from legacy IT work to high-value areas which they have neglected till now.