Why H1B visa reform Bill spells bad news for Indian IT cos

Amendments Sought

The Protect and Grow American Jobs Act reintroduced on Thursday proposes to raise the minimum salary of H1B visa aspirants to USD 100,000 per annum from the current USD 60,000. Besides, the proposed US immigration reforms seeks to make a Masters degree mandatory for H1B visa holders.

The proposal has raised concerns from analysts too. “Clearly, there is a more protectionist tone coming out from Trump administration,” said Richard Harris, founder of Port Shelter Investment Management.If the reform goes through, the resultant increase in employee wages will be a cost worry for the IT industry, but Tech Mahindra doesn’t see it as a disaster to be overly concerned, Tech Mahindra Vice-Chairman Vineet Nayyar has said.

IT Stocks Hit

Stocks on the Indian bourses slipped over the reports of the proposed US immigration reforms. Tata Consultancy Services, HCL Technologies, Infosys, Tech Mahindra, Wipro and MindTree were down 2 percent to 4 percent on the National Stock Exchange (NSE).Nifty IT Index fell about 3 percent today.

India Impact

“An increase in H1B salaries to the mooted USD 100,000 levels could lead to significantly higher costs for the industry. Given the competitive nature of the sector currently, we see a risk that these higher costs may not be fully passed on to end clients, leading to vendors absorbing a significant extent of the impact. Over time, we could see increasing adoption of offshore resources and automation,” Citi said in a note on Friday.Indians with H1B and L-1 visas contribute USD 1 billion annually to the US, according to NASSCOM estimates. Indian IT industry contributes to about 4 lakh direct and indirect jobs in the US , contributing for about USD 5 billion in taxes annually. Nearly 60 percent, or about 65,000, of the total H1B visas are issued to Indian contingent, mostly in the IT sector.If the reform goes through, the resultant increase in employee wages will be a cost worry for the IT industry, but Tech Mahindra doesn’t see it as a disaster to be overly concerned, Tech Mahindra Vice-Chairman Vineet Nayyar has said.The USD 143-billion Indian IT industry derives about USD 65 billion of total export revenues from US market alone, according to estimates.

A US Labor Department report in December 2015 estimates a shortfall of about 445,000 computer professionals by 2022. “Job openings related to the high technology sector cannot be filled by Americans alone and therefore to bridge this skill gap, the US administration has been taking a calibrated approach to bring in the required talent from abroad through H1B visa route,” the Labor Department had stated then.