New Delhi / Mumbai: Signalling a softening of its stance on the issue of raising professional work visa fees for Indian companies, the US said on Tuesday that it would work with India to address its concerns.
“We appreciate their concerns and we’ll work with India to address them,” acting deputy state department spokesman Mark C. Toner said at a daily press briefing.
A transcript of the briefing was posted on the state department’s website.
India has threatened to take the US to the World Trade Organization (WTO) over the issue, saying the new border security Act that US President Barack Obama has signed is against WTO rules because it effectively discriminates against Indian companies.
Funds to strengthen security along the US border with Mexico will be raised through visa fee increases that will hurt Indian information technology companies such as Tata Consultancy Services Ltd, Infosys Technologies Ltd and Wipro Ltd.
Asked about the likelihood of the issue provoking India’s first complaint in the WTO against the US, Toner said it was within India’s “purview” to take the case to the multilateral body.
“Again, I think we remain cognizant of the effect that this legislation may have on India, and we’re going to try to work with them to mitigate it,” he added.
Commerce secretary Rahul Khullar said on Tuesday India “cannot keep quiet” if protectionist barriers by the US target India’s commercial interests.
An official in the ministry of external affairs, who spoke on condition of anonymity, said the ministry had been working hard behind the scenes to resolve the issue.
“The Indian ambassador in the US (Meera Shankar) has been in touch with the key members of the US Senate, Congress as well as members of the influential India Caucus to sort out the issue. This is an (ongoing) process. Cooperation in the field of information technology is a very important facet of our overall trade cooperation,” the official said.
In New Delhi, the ministry has been in touch with the US ambassador to India Timothy Roemer to sensitize him to the concerns of the IT industry. “The ministry has been regularly coordinating with other arms of the government,” the same official added.
Philip J. Crowley, assistant secretary at the US department of state, said on Monday the US was reviewing the implications of the new Act.
“Yes, we are talking about the implications. Yes, we are reviewing a suggestion that this Bill is not WTO-compliant. I’m not aware that we’ve reached any final judgement, but we’re not sure that necessarily any WTO issues are triggered,” he said.
Toner said he did not think the Indo-US relationship would be affected by the issue, which precedes an expected visit to India this year by the US President.
“We realize it could impact Indian companies that invest in the US and we also understand the potential impact on Indians who work in the US as well as some American businesses,” he said. “But we remain confident that our long-term economic partnership with India will continue to deepen and provide benefits for both societies.”
Ameet Nivsarkar, vice-president at India’s IT industry lobby Nasscom, said the grouping had raised the issue at the highest levels, both in India and with its partners in the US.
“Probably the message has hit home,” he said, adding that it may be too early still to comment on what form the implementation of the law will take. “Let us not count the chickens before they hatch. We are working on what options are available in terms of going forward, now that the Bill has been signed into law by the President,” he said.
The IT sectoral index of the Bombay Stock Exchange, or BSE-IT, gained 2% on Wednesday to close at 5,567 points. The exchange’s bellwether Sensex gained 1.15% to close at 18,257.12.
An analyst with a domestic brokerage who tracks the sector said the apparent softening of the US stance on the visa issue might have contributed to positive investor sentiment on IT stocks.
“Fundamentally, however, financial implications of the new visa law are negligible,” said the analyst, who did not want to be named as he is not an authorized spokesperson.
It emerges that the financial impact of the Bill may not be as high as estimated. Nasscom had said the law might impose an additional burden of $250 million (Rs.1,165 crore) on the Indian IT industry.
Citing unnamed sources in Nasscom, CNBC-TV18 said the cost burden may only be around $100 million if the visa fee is increased by the proposed $2,250.
India’s IT sector earned nearly $50 billion in exports in fiscal 2010.
According to analysts at brokerages such as CLSA Asia Pacific Markets and Religare Capital Markets Ltd, the visa fee hike will have a negative impact of only around 50-60 basis points on the profitability of large Indian IT firms. At Infosys, for instance, visa expenses account for about 0.4% of its overall revenue.
One basis point is one-hundredth of a percentage point.