Indian IT industry: Coping with the changes in the American H1B visa regime

Written by Anshuman Jaswal || March 27 2017

The uncertainty over H1B visas in the US is taking a toll on Indian IT firms, most of which have heavy exposure to the US market in terms of both revenues and headcount.

Several leading IT majors such as TCS, Wipro, Infosys and HCL have provided glimpses of how they plan to tackle the expected changes in the US visa regime. Some of the strategies to cope include hiring locally in the US, reducing the emphasis on physical presence of Indian employees in the US market, and training existing employees to work on newer areas such as artificial intelligence, cloud computing and blockchain. Cognizant has recently hinted that it will reduce its workforce in India in the coming year, which is another option available to these firms.

Financially, some of the firms have tried to deal with the concerns over their future in the market by considering or initiating share buybacks. These include TCS, Infosys, HCL and Cognizant. While this might be a normal move that companies across capital markets often avail of, it is especially insightful in the current scenario. It indicates the pressure these firms are under to maintain their attractiveness to their shareholders and the market at large. Other reasons for the buybacks include pressure from certain institutional investors and tax incentives for buybacks from the Indian government.

It is also important to consider the role of the Indian government in the changing environment. The Trump administration in the US has indicated that it does not necessarily believe that free trade is good for the US. There is emphasis on focusing on job creation within the US, at the possible expense of investments by US companies abroad. The issues with H1B visas are just one part of this jigsaw, with curtailing of immigration, both legal and illegal, being one of the central tenets of the Trump administration. All of this leaves a very difficult balancing act for the Indian government. It has to be firm in pointing out the mutual benefits from the visa regime for the people and companies from both the countries. Using visas such as H1B at the margin of the workforce helps improve the productivity of the US economy. Used effectively, it can be a means to increase jobs within the American market through the greater use of technology.

As has been pointed out by several economic and business experts, in the long run it might actually be better for the Indian IT industry, and the Indian economy overall, to decrease the exposure to the US market. As the Indian economy expands at a fast pace, there would be a growing requirement for highly trained engineers and programmers within the domestic market. Specifically for the Indian IT majors, this might be an opportunity to focus on markets and regions that might offer them more growth. Asia-Pacific has been one of the fastest growing regions in the world since the 1980s and is expected to continue this trend. A new emphasis on the Asian market, including India, should help mitigate some of the slowdown these firms might face in the the expectedly more protectionist US and UK, and a stagnating Europe.