Trump’s visa ban not much trouble for Indian IT sector; firms already sending fewer techies abroad

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Updated: Jul 07, 2020 3:56 PM

US President Donald Trump’s decision to suspend H1-B and L1 visas till the end of this year might not stir the pot for India’s leading information technology firms.

The H-1B visa is a non-immigrant visa that allows US companies to employ foreign workers in speciality occupations that require theoretical or technical expertise.Techies coming in from H1-B visas are less than 5% of the on-shore workforce of the top 5 listed Indian IT firms.

US President Donald Trump’s decision to suspend H1-B and L1 visas till the end of this year might not stir the pot for India’s leading information technology (IT) firms. Top 15 Indian IT firms have already been scaling down the number of techies they send to the United States from India as the denial rate climbed higher and higher each year, a report by Crisil said. Additionally, the US government’s decision pertains to just new H1-B and L1 visas issued till December 2020, and not to visas coming up for renewal, which outnumber the new visa applications.

Crisil said that over the past three years, the dependence on the H1-B visa has been gradually scaled back as the number of denials kept surging. The denial rate for new visa applicants was at 6% in 2016, this was before US President Donald Trump took charge of affairs. The number scaled up to 8% in 2017, and in the first half of 2020, the denial rate was a whopping 39%. Techies coming in from H1-B visas are less than 5% of the on-shore workforce of the top 5 listed Indian IT firms, these 5 firms account for 60% of the revenue share of the industry. “On the other hand, the share of local hires in their US onshore employee mix has steadily increased from 30-35% in fiscal 2017 to about 55-60% in fiscal 2020. And with firms aiming to increase the share of local talent, especially with digital skills, the transition impact is expected to be marginal for them,” said Anuj Sethi, Senior Director, Crisil Ratings.

In 2016 the number of new visa approvals stood at 9,649, a year later the number slipped to 8,8858. In 2018 new visa application approvals for Indian tech giants was at just 2,459. In the first half of 2020 the number of visas approved stood at 3,898 with a denial rate of 39%. However, the number of visa renewals approved has been significantly higher than new visa approvals. In 2016, the number of renewals that were approved stood at 36,949, in 2018 the number was at 22,455 and in the first half of 2020, the number of renewal applications approved is already equal to the number from last year.

The financial cost of the move will also be marginal, according to Crisil Ratings. “Assuming employee requirements through new visa approvals are completely met via local hiring and considering a 25% premium for local hiring over the H1-B route, the additional cost burden on IT firms may not exceed Rs 1,200 crore,” the report said. However, it warns that any adverse change in visa renewal regulations or a continued suspension of H1-B visas should be closely watched as the IT industry drives 60% revenues from North America.

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