New US immigration rule may hit India’s IT outsourcers

A new immigration rule being pushed by the senators can force India’s top software firms including Tata Consultancy Services Ltd and Infosys Ltd to remove professionals on H1B work permits from onsite locations and disrupt their traditional business model that has nearly one-quarter of their total revenue coming from such local projects.

A Washington Post article published over the weekend said that according to the new proposal, India’s outsourcing firms that use the maximum number of H1B work permits could be the biggest loser, while American technology firms including Microsoft Corp.,Cisco Systems Inc. and even Facebook Inc.

would benefit. The new proposal is being heavily pushed by the “gang of eight” senators that include four Democrats and four Republican lawmakers.

According to the proposed immigration Bill, the contents of which are not yet public but were mentioned in the Washington Post article, firms with more than half of their US employees using the visas, a group that includes top Indian tech firms, are likely to face both new salary requirements and restrictions on the number of work permits they can use for their staff.

Nasscom, the industry lobby representing India’s $108 billion information technology (IT) industry, said the new proposal could have a draconian impact on the sector and its customers in the US.

“Labour mobility and movement of skilled professionals for temporary work is not an immigration issue; it is a trade issue. I am hopeful that US businesses will weigh in to influence their lawmakers against such moves that could impact trade between the two countries”, Som Mittal, president, Nasscom, said on Sunday in an email reply.

“Those with fewer than 15% of workers using the visas—a group that includes most major American technology firms—will get access to new visas with few new restrictions,” the article said.

CEOs and senior officials in the industry said if passed, the proposal could “kill” India’s IT industry that depends on temporary work permits for serving customers such as Walmart Stores Inc. and Citigroup Inc. locally.

“The proposed content seem to be clearly designed to severely impact the business model of only the ‘Indian IT sector’ and debilitate Indian IT companies—an industry that contributes over 7.5% to India’s national GDP and over 25% to Indian exports, of which the US comprises roughly 60% of those exports,” said an Indian IT industry official requesting anonymity.

“What is ironical is that this will not just impact the Indian IT industry and also seriously impair Indo-US relations, but will also affect the entire business model of US companies—across financial services, retail, telecommunications, healthcare, and so on—that routinely rely upon Indian IT firms to run their daily operations and drive innovation.

With acute shortage of technical talent and STEM deficits (a fact re-emphasized by even US President Barack Obama) to just run their existing businesses, leave along grow them, US companies are dependent on H1 and L visas,” said the IT official. STEM stands for science, technology, engineering and maths.

This is not the first time the Indian IT industry is complaining about proposed immigration rules that could potentially harm their business. In 2010, the US Border Security Bill passed by the Senate increased the application fee for H1B visas by $2,000 in order to fund the $600 million plan to boost security at the US-Mexico border.