The H-1B Visa Policy Change Might be Good News for Indian IT
The debate over H-1B visa has intensified ahead of US President-elect Donald Trump’s inauguration ceremony on January 20. For Indians working in their hometown and planning to move abroad, the changes in the policy have become a topic of utmost importance, particularly for the Indian IT sector. According to a report by Macquarie Research, the ongoing challenges in hiring local talent in the US highlight the critical role of H-1B visas in addressing the talent gap. The US has a continuous shortage of qualified technical workers, further exacerbated by the 2.9% unemployment rate in November last year. This suggests that proposed reforms to H-1B visa policies could benefit Indian IT firms. Despite their relatively low share of total visa positions – around 65,000 every year plus 20,000 for those who receive higher education from US universities – they would still be able to fill those positions. Indian IT companies rely heavily on the H-1B visa program to deploy skilled workers in the US. Macquarie has decided to maintain an “outperform” rating for TCS, Infosys, and HCLTech, which suggests that the firm believes Indian IT companies are well-positioned for this change. Meanwhile, Mrinal Rai, assistant director and principal analyst at ISG, told AIM that the majority of the Indian IT providers were already preparing and reducing their dependency on the H-1B by investing in hiring more local talent. “Given India’s vast talent pool, service providers have made significant strides in closing the skill gaps. Besides, many providers have offered upskilling programs to support local talent,” Rai said. Rai added that global big-tech companies are impacted more than Indian IT companies. “Technology providers such as Apple, Amazon, Google and Microsoft have been more significantly impacted by the tightening of H-1B policy than the top H-1B applicants, including Cognizant, Infosys, TCS and Wipro,” he said. Flat Wage Floor Concerns Macquarie has raised concerns about a proposal to introduce a flat wage floor for H-1B visa holders. A flat wage is a fixed salary that doesn’t adjust for differences in job roles, locations, or cost of living. The report highlighted that such a measure might not be feasible, given the wide disparities in the cost of living across the US. To reduce these issues, Macquarie suggested transforming H-1B visas into general work permits, similar to Norway’s skilled work permit model. This shift would allow greater job mobility for visa holders, promote competition among employers, and enhance worker protections. If such changes are implemented, it would largely benefit the Indian IT workforce applying for visas as they would account for regional economic disparities and the complexities of the global talent market. Krishna Vij, VP of IT hiring at TeamLease Digital, told AIM that larger IT firms are likely to adapt more effectively to the policy change due to their advanced training programs and operational flexibility. “However, smaller and mid-tier firms could benefit if the policy promotes a more equitable distribution of visas, as these companies typically submit fewer applications.” She added that the firms that have invested in localised operations and US-based hiring will gain a competitive edge, which will reduce their dependence on H-1B visas. This includes firms like Infosys and TCS, which might navigate the changes more effectively. Their experience in managing visa allocations and compliance makes them adaptable to new regulations with minimal disruption. On the other hand, smaller IT firms or those heavily reliant on H-1B visas may encounter greater challenges. “Mid-tier and smaller IT companies may face heightened challenges due to increased competition for visas, especially if wage-based prioritisation becomes a deciding factor,” Vij said. She said that this will result in many smaller firms accelerating their localisation strategies, focusing on hiring US-based talent to mitigate visa risks. “The quota limit will intensify competition among Indian IT companies and force them to submit higher numbers of applications to secure the required slots.” This might also result in companies prioritising hiring in other countries, like Canada or Mexico, for nearshore delivery centres. “These strategies will help mitigate risks, but they might also increase short-term costs,” Vij added. Furthermore, past compliance issues and fines have prompted Indian IT firms to enhance their adherence to regulations. For example, Infosys had earlier agreed to pay millions of dollars in fines for US visa violation cases. Already a Decline Data from the National Foundation for American Policy (NFAP), a US-based non-partisan think tank, revealed a decline in H-1B visa approvals for Indian IT companies for FY2024. The seven largest Indian IT firms secured approval for just 7,299 new H-1B petitions – a significant drop from 14,792 approvals in 2015. This is around a 50% decline in acceptance rate for visa approvals. Furthermore, the 7,299 approvals represented only 5.2% of all H-1B visa approvals for FY24, which equates to just 0.004% of the US civilian workforce. Denial rates for H-1B applications were low at 2.5% – slightly down from 3.5% in FY23, as per NFAP’s findings. For example, Amazon topped the list of H-1B approvals for initial employment in FY24, with 3,871 approvals – down from 4,052 in FY23 and 6,396 in FY22. Cognizant followed with 2,837 approvals, Infosys with 2,504, and TCS with 1,452. The number accounts for less than 0.1% when we compare the number of visa applications for smaller firms. Meanwhile, a separate report also revealed that Indian IT giants TCS, Wipro, Infosys, and HCL have reduced their reliance on the H-1B visa by 56%. These figures reflect a continued downward trend in H-1B visa approvals for Indian IT firms, but it is expected to change with the current policies or at least stay unharmed.
Apple, Amazon, Google and Microsoft have been more significantly impacted by tightening of H-1B policy than the top H-1B petitioners, including Cognizant, Infosys, TCS and Wipro.
Apple, Amazon, Google and Microsoft have been more significantly impacted by tightening of H-1B policy than the top H-1B petitioners, including Cognizant, Infosys, TCS and Wipro
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Mohit writes about AI in simple, explainable, and often funny words. He's especially passionate about chatting with those building AI for Bharat, with the occasional detour into AGI.