Trump’s H-1B proposal might prove detrimental for US economy

Indian IT companies unlikely to be impacted as they have increased local hiring

uscis [File] Currently, of the total number of 65,000 H-1B visa applicants around 70 per cent are Indians | Reuters

The recent proposal by US President Donald Trump to suspend employment visas, including H-1B visas, may not have a major impact on the Indian IT companies as widely feared. Being a presidential election year in the US, chances are high that the proposal may just remain that—a proposal. 

At the same time, Indian IT companies have already embarked on well-defined strategies that have already increased the number of local hires for their US centres, due to prolonged visa issues. “Any move by President Trump to possibly deny entry to H-1B visa holders or issue new H-1B visas can be quite detrimental to the US economy as technology companies in the US may not be able to fill mission critical positions, which could affect their overall business. Perhaps, it could lead to more layoffs in an already challenging environment. Further, Indian IT companies whose bread and butter is the supply of human capital to the US companies may have some major business disruptions,” Vivek Tandon, Founder and CEO of EB5 BRICS told THE WEEK. 

With the dire unemployment situation in the US, especially during the Covid-19 pandemic, the protectionist instincts among the policy makers seem to have risen in the US. Furthermore, the presidential election set for November is likely to further exacerbate the voices that seek H-1B visa restrictions. However, a proposal is only a proposal till it is approved. 

However, there are numerous questions that remain unaddressed. “Will the restrictions apply only to the 2020 visa applicants or will it impact even the existing visa holders, are some of the questions that remain unanswered. With such a move, there is a possibility of a negative fall out for the US economy as well, because  many advanced technology skill sets are unavailable in the US and there is a dearth of adequate supply of high-end technology talent,” remarked Alok Shende of Ascentius Consulting. This would force the US government to rethink its move. 

Currently, of the total number of 65,000 H-1B visa applicants around 70 per cent are Indians. This year's applications closed during the first week of April itself and there are calls not to abolish that. So this move may apply only for the next year if it is passed and approved. 

“Majority of the H-1B visas are filled with IT professionals. Perhaps, there may be a move to restrict the number of IT professionals in the H-1B visa category and bring in more non-IT professionals such as doctors, nurses, etc from the next fiscal. However, it seems unlikely given the dearth of talent in the STEM (Science, Technology, Engineering, and Mathematics) segment in the US. Moreover, many Indian IT companies are increasingly involving local talent and training them locally. HCL and Wipro have around 70 per cent locals as their workforce in the US. TCS and Infosys have more than 55 per cent of locals in the US. These companies from the very beginning have increased their local hiring to deal with any visa disruptions,” explained Amit Chandra, Assistant Vice President, IT Research at HDFC Securities. 

If Trump's move materialises and is kept in force for a long time, several US companies, including the government departments will be impacted due to cost increases and potential delays in implementation of their automation projects. Many such critical projects are handled by Indian IT companies. This is also the reason why many of them have set up their centres in the US with local hires to handle such projects locally. 

“Large service providers like TCS, Infosys, etc have been stepping up their local hires over the years. Given the current state of slowdown, for the next three to four months, they might be able to operate with their existing employee strength in the US and not be required to hire more. If this is going to be long drawn, it’s going to hurt their margins and they may try passing on some of these costs to the end customer in the US. This will not be a good situation for the US and Indian companies. On the other hand, non-large service providers would feel the pinch of this because the H-1B holders cannot enter the US until the suspension is lifted even if flights start operating from July or August. Besides this, industry bodies and lobbying efforts would surely be in an overdrive to influence thinking among lawmakers in the US about the impact of this decision on their project costs and time,” remarked Aditya Mishra, Director and CEO of CIEL HR Services.