H1B visa: US may not go in for quotas yet — here’s why

By: |
Updated: July 1, 2019 7:13:17 AM

This is likely to impact companies under our coverage given their higher dependence on H-1B visas. As per USCIS data for FY16/17, India accounted for 62-63% of the approved H-1B petitions for initial employment, 80-81% for continuing employment and 74-76% overall. In this note, we address several key points.

H1B visa, US, india, H1B visa news, H1B visa status, H1B visa process, H1B visa usa, H1B visa quotaThe deadline to adhere to the data protection rules was set for 15 October, 2018 and was missed by firms such as Visa and MasterCard.

As per a recent Reuters article, the US is considering caps on H-1B work visas for nations that force foreign companies to store data locally. Under its Personal Data Protection Bill 2018, India is enforcing data localisation to ensure protection, security and better control or transmission of data outside the country. The deadline to adhere to the data protection rules was set for 15 October, 2018 and was missed by firms such as Visa and MasterCard.

In what has been widely viewed as a retaliatory measure, the US plans to impose a 10-15% cap on the annual quota of 85k H-1B visas on countries with a data localisation policy. This is likely to impact companies under our coverage given their higher dependence on H-1B visas. As per USCIS data for FY16/17, India accounted for 62-63% of the approved H-1B petitions for initial employment, 80-81% for continuing employment and 74-76% overall. In this note, we address several key points.

We think a 10-15% quota on India will hurt companies in the US, too; also the probability of this happening near term seems negligible
In our opinion, a permanent change in quotas is likely to require a change in legislation. This is often a time-consuming process and cannot be dealt administratively by signing an executive order. Tech talent availability is already constrained in the US with the current historically low unemployment rate in the computer occupations category. We note that 69% of H-1B work visas are issued in this category. India is a significant source of tech talent for the US and leads competition from other countries, as demonstrated by the percentage share of visas allotted to India. While Tier-1 IT companies benefit from the H-1B visa programme, US companies also consume a large percentage of  H-1B visas (a significant chunk would be from India) and, in our view, would lobby against this proposal.

We review the following potential scenarios that could play out India garners 62-63% of the new visa allotment based on the approved petition data for FY16/17. If the percentage of visas allotted to Indian nationals falls to 15% (vs 62% currently), this would imply that Indian Tier-1 IT players would receive only 25% of the visas they do currently. Also, the cap could lead to heightened competition from companies such as GOOG and FB, where salary levels are better compared to India Tier-1 IT.

The remaining 75% of visas will likely be replaced by locals, and even assuming a 20% higher cost for these replacements would result in a negligible margin impact of ~10-15bp across companies, as the percentage of new visas to existing ones is in the mid-single digit range. Hence, unless we see the impact of quota on “renewals and transfers”, the margin impact is likely to be more gradual, as the percentage of visas vs locals skews towards more locals.

 

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1This is how Bytedance’s Helo looking to have 100 million users in India by end of 2019
230 lenders of troubled DHFL led by Union Bank of India to meet on Monday
3RTGS, NEFT fund transfers to get cheaper from Monday