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How Can Trump’s H-1B Visa Bill Affect The Indian IT Industry

Scroll Cafe Team

Donald Trump, the new president of the United States said, “My administration will follow a simple rule - Buy American, Hire American. Years earlier we used to take pride in buying things 'Made in America'. We love our companies, but we don't love them when they go out of our country. There will be consequences.”

Trump’s administration has introduced the H-1B visa Bill in the House of Representatives. This news released on Tuesday resulted in a loss of more than $7 billion in market value in a single hour of trading. The stocks of the top Indian IT companies, TCS, Wipro and Infosys fell down drastically. TCS shares fell by more than 5%, while that of Infosys and Wipro by 4%.

 

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According to the bill, the minimum salary cap for H-1B visas would be raised to $130,000 from its current $60,000. And, that can result in loss of jobs for Indians working in US at lower rates if the company is not able to pay them double their salary.

India is the largest recipient of H-1B visas in the world. In 2016, 85,000 H1-B visas were issued, of which 70% went to Indians. The government has accused the Fortune 500 companies of misusing the H-1B visa provision. Amazon’s chief Jeff Bezos has challenged the executive order of the government.

In an interview to CNBC, Sonal Varma, chief India economist at Nomura, said, "Immigration restrictions are the main source of India's vulnerability. The viability of the offshoring model of Indian software firms would be at risk." "India is fundamentally in a strong position due to sharply lower fiscal and current account deficits since the taper tantrum, lower inflation and more sustainable growth prospects due to continued productivity enhancing reforms instituted by the Modi government," she added.

Apurva Prasad, a research analyst at HDFC Securities, said, "It is an adverse development, but I suspect the minimum wage limit will not rise beyond $100,000. There will be strong lobbying to curb it at that level”. “Assuming the minimum wage is fixed at $100,000, the tier–I Indian IT companies could take a hit of around 150-300 bps on their operating margins,” he further added.

 

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In a phone interview to Livemint, R. Chandrasekhar, president of software industry lobby group Nasscom, said, “If skills aren’t available in the US and per law you can’t bring workers in then either the job will remain undone or the job will be shifted to India or some other location outside the US. It will also be a big loss to the US since outsourcing jobs creates jobs directly and indirectly for the US economy.”

As per an NDTV report, Chicago-based businessman Shalabh Kumar said, "My expectation is that there would be a good monitoring of abuse and fraud in H-1B system. There is a little bit of that, not much. Otherwise when the US economy grows 4-5 per cent per year, there is going to be a very big need of IT workers and IT work, which will still be primarily be going to India and Indians”.

People have different outlook on the bill. Only time will tell how does it affect the Indian economy and that of US in the longer run.


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