Impact Of New H1B Visa Guidelines On Indian IT Industry

The current U.S. govt. signed an order to reform the H1B Visa by scrapping the existing lottery system that was used to award the visa. Now the Visa will be given based on merit (“most-skilled or highest paid” petitioners). The Bill introduced in the U.S. congress raises the minimum salary wages to 100k/per year from 60K/per year for granted positions under the H1B Visa scheme. This bill is designed to close loopholes in the highly skilled immigration system being used by some companies to import cheap foreign workers, however, this order could slow the growth of the Indian IT world and can make the industry less competitive.

Indian IT companies emerged on the front line of the global outsourcing industry by using the country’s large pool of trained and low cost engineers to beat the competition while some are deployed to the client site overseas. Millions of others are working in India’s tech hub (Hyderabad, Bengaluru etc.) but this core business model is under threat because of the change in immigration and visa policy in major markets, such as U.S.

It’s a known fact that Indian IT companies are the biggest beneficiaries of the H1B Visa program and it is a very important lifeline for Indian IT sector. Due to a tougher stand on the visas, companies will have to increase local hiring. This step will increase the cost of labor and remove the cost advantages of Indian IT firms they had in comparison to other regional and global IT firms.

Indian software companies use Indian employees due to a shortage of skilled workers in the U.S. Even American technology companies like Microsoft and Intel also employ many Indians on H1B programs. Many Indians earn less than the minimum proposed salary of $100K. As per the sponsor of the bill, the lower cost of Indian hires has displaced American IT workers. Industry insiders point out that Indian employees are flexible and can be easily moved from one city to another city. They often work for long hours to coordinate with teams at home without extra pay. These options may not be available with American workers.

The slowdown is likely to be sharper in coming years, especially for companies that have about half of their employees in the U.S. working on H1B. The next one and half years will be tough for the sector in terms of earnings growth, if they hire more locals and pay higher salaries at onsite. A combination of these factors is the biggest challenge the Indian IT industry that has to face in the coming time.

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