Indian IT Industry Could Face Layoffs Owing To Worsening H-1B Visa Curbs In The Us And Rising Rupee: Assocham Report

With the US tightening the norms for H-1B visas under the President Donald Trump’s ‘Buy American, Hire American’ campaign, the Indian IT companies are bound to face disruptions by way of higher costs and even some laying off workforce back home, as the rising rupee is aggravating the situation further for the technology export firms, an ASSOCHAM paper has cautioned.    

Nearly 86% of the H-1B visas issued for workers in the computer space go to Indians and this figure is now sure to be scaled down to about 60 % or even less.

Remittances from the US would decline hurting the balance of payment. World bank data showed the U.S was the second largest source of remittance for India in 2015, behind Saudi Arabia, and about $10.96 billion nearly 16 percent of the total inflows were sent to India. ASSOCHAM expects it to disturb the balance by 8-10%.

As the cost pressure would increase, aggravated by rising rupee leading to lower realizations, the Indian IT firms may be forced to displace workforce. “In that case, the chances of layoffs are real,” the ASSOCHAM Secretary General Mr. D S Rawat cautioned while impressing upon the IT industry apex bodies and the government to work out a joint strategy to deal with the unfolding situation.  In the last three months, the Indian currency has gained by at least five percent against US dollar, reducing net realizations for software exporters, among other export –oriented sectors.  

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“After all, our stakes are quite high. It is a question of USD 100 billion software export industry that employs over four million people and reservations for the H1B visa for start-ups with less than 50 employees will decrease the number of visas available for Indian firms. 

According to the ASSOCHAM paper, the reverses resulting from the tightening of the H1B visas would force IT giants to create fundamental changes in their strategies in terms of hiring, salaries, jobs, impacting employees in India too.

The move would also have an adverse macro impact for the Indian external sector economy. Remittances from the US would decline hurting the balance of payment. World Bank data showed the U.S. was the second largest source of remittance for India in 2015 with USD 11 billion - nearly 16 percent of the total inflows. “We expect disturbances in remittances by 8-10%”, the paper said, adding there would be fewer opportunities for individuals to work on offshore location.

With the UK already hiking the minimum wage requirement to £35,000 for tier-2 visa immigrants, this latest move by the US will act as a definitive dampener to the Indian outsourcing industry.

The alternate solutions for the Indian outsourcing industry are:  investing in “near shore centers” – facilities close to the US, focus on local hiring in America and to work virtually, which is becoming easier with the wider adoption of cloud services and greater digitization.