NEW DELHI — With the U.S. tightening the norms for H-1B visas under President Donald Trump's 'Buy American, Hire American' campaign, Indian IT companies are bound to face disruptions by way of higher costs and even some laying off workers back home, an Assocham paper said here April 19, which added the rising rupee is aggravating the situation further for the technology export firms.
Nearly 86 percent of the H-1B visas issued for workers in the computer space go to Indians and this figure is now sure to be scaled down to about 60 percent or even less, the paper said.
Remittances from the U.S. would decline, hurting the balance of payment situation. World Bank data showed the U.S. was the second largest source of remittances for India in 2015, behind Saudi Arabia, and about $10.96 billion, nearly 16 percent of the total inflows, were sent to India.
The industry chamber expects it to disturb the balance by 8-10 percent.
As the cost pressure would increase, aggravated by rising rupee rates leading to lower realizations, the Indian IT firms may be forced to displace some if its work force. "In that case, the chances of layoffs are real," said Assocham secretary general D.S. Rawat.
He said the IT industry apex organizations and the government need to work out a joint strategy to deal with the unfolding situation.
In the last three months, the Indian currency has gained by at least five percent against the U.S. dollar, reducing net realizations for software exporters, among other export-oriented sectors.
According to the Assocham paper, the reverses resulting from the tightening of the H-1B visas would force IT giants to effect fundamental changes in their strategies in terms of hiring, salaries, and jobs, impacting employees in India, too.
With Britain already hiking the minimum wage requirement to euro 35,000 for tier II visa immigrants, this latest move by the U.S. will act as a definitive dampener to the Indian outsourcing industry.
The alternate solutions for the Indian outsourcing industry are: Investing "near shore centers" – facilities close to the U.S.; focus on local hiring in America; and to work virtually, which is becoming easier with the wider adoption of cloud services and greater digitization, the paper said.