US President Will Ease H1B Visa Rules; But Indian IT Firms May Not Opt For H1B Visa: Here’s Why?

US President Will Ease H1B Visa Rules; But Indian IT Firms May Not Opt For H1B Visa: Here's Why?
US President Will Ease H1B Visa Rules; But Indian IT Firms May Not Opt For H1B Visa: Here’s Why?

Since his Presidency in 2016, former US President Donald Trump has rolled out many reforms with a clear goal to tighten the accessibility of US job markets by foreign nationals, in spheres of employment.

We have covered a plethora of articles dictating every one of these changes, along with its mercurial impacts on the IT sector in India, besides US job markets too.

Along with tightening the norms governing foreign citizens to work and apply for a permanent residency in the US more stringent, the Trump government also recorded the highest rejections of work visas applied in the US.

Now with Joe Biden commencing as the 46th President of the United States, there has been higher hopes of fixing the whole immigration system, in best interests of hiring foreign talent in US markets.

To give some base to it, President Biden released a policy document, called ‘The Biden Plan for Securing Our Values as a Nation of Immigrants’ last month, the basis of which is to undo the damage done by the Trump government on immigration policies.

Indian IT Cos to Play Safe Despite Biden’s Help

Since the past 4 years, the Indian IT sector has undergone major revenue downfalls, as a large percentage of their revenues come from the US.

Indian IT companies depend on work visas like L-1 visas and H-1B visas, which are temporary work visas issued to high skilled professionals in the US.

Each year, of the 65,000 H-1B visa cap in the US, more than 60% is bagged solely by Indian applicants. 

However, with increasing visa rejections and RFEs (Request for Evidence) issued in the past 4 years, the Indian IT industry has adapted to this by sending fewer Indian employees to the US and hiring more local employees (Americans) there.

Now that the new POTUS has promised to work on reviving the stringent immigration policies, with the new document stating an increase in medium-term work visas to high-skilled immigrants and removing country-wise limits on them, the Indian IT companies are unlikely to trade their ‘safe’ position despite a more liberal US visa regime.

Understanding Indian IT Industry’s Revenue Dependence on US Visa Activities

The US is among India’s biggest markets for the IT sector, so much so that among our top three IT companies, TCS makes half of its revenues from the US market, while Infosys and Wipro account for 60% of their revenues.

This creates a direct and rather crucial impact of US visa changes on these companies’ and industry’s profit margins.

Last month, the Indian credit rating agency ICRA, released a report, which stated that if the restrictions proposed by Trump were fully implemented, Indian IT companies’ operating margins would fall by 2.6% to 5.8%.

Indian IT Companies Reduce Reliance on US Visas in 4 Years

According to data provided by Kotak Securities and Reliance Securities, Indian IT companies have reduced their dependency on US work visas, like the H-1B visa and L-1 visas, significantly in the last 4 years, simultaneously hiring more Americans.

The table created below depicts a decline in the annual growth rate or an annual decline rate in the number of H-1B visa employees in the Indian It companies in the US.

Indian IT Cos in the USAnnual Decline in H-1B EmployeesIncrease in share of American Employees in 2019-20 
HCL Technologies6%68%
Tech Mahindra9%45%

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