Increasing scrutiny in US visa policy may hit India’s IT firms

Increasing scrutiny in US visa policy may hit India’s IT firms

New Delhi: Advocates for immigration reform in the US speak of how out-of-date immigration policies in the US may be driving companies to find “creative" ways to get access to the workers they need. “The system is flawed," says Washington-based Migration Policy Institute (MPI) analyst Jeanne Batalova, who points out that the last time the immigration system was revised was 20 years ago and is out of date.

“Back then, we were not operating in a global economy that would require and create opportunities to send workers on these short-term turnaround jobs." She says people “consider that the reason companies may resort to illegal practices is because they need workers, and cannot find them through the legitimate options available to them".

“There is really a need to rethink how immigration, and skilled immigration in particular, has to be used as a resource," Batalova says. “And it has to be managed as a resource—and developed and thought through in the context of growth that a country needs to outline."

However, immigration policies may be tightened.

A WikiLeaks cable published in April by The Hindu showed that the number of cases of B-1 (for business) and B-2 (for pleasure) visa frauds reported by one US consulate in India “nearly doubled from 1,089 to 2,121" over the first six months of 2009. “Our systems are continually getting better, because we have stronger anti-fraud teams, we have better connections with the department of homeland security, the information loop is just much quicker for us. We have a lot more information about what people do when they’re in the States, how long they stay, and that’s allowed us to take a better look both at our operations and to better evaluate these applications," said James Herman, minister counsellor for consular affairs at the US embassy in Delhi.

Also, recently five companies (including American firm International Business Machines Corp., or IBM, and India’s largest technology firm Tata Consultancy Services Ltd,or TCS) were suspended from the US consulate’s Business Executive Program (BEP)—which allows companies to expedite visa applications.

According to a report in the Business Standard, both TCS and IBM have been reinstated in the programme. IBM said in an emailed statement that it is committed to the high levels of compliance of the programme. A TCS spokesperson said the company continues to participate in the programme.

Following this, the US consulate held a meeting with BEP members in Chennai to talk about “proper use of the US visa system". According to the US department of state, one Indian consulate reported that the net refusal rate for business visas had increased 25%.

Such incidents are fodder for American politicians with protectionist inclinations: Last week, representative Zoe Lofgren of California, a Democratic Party member of the immigration subcommittee of the house judiciary committee, introduced legislation called the Immigration Driving Entrepreneurship in America (IDEA) Act of 2011, which will prioritize H-1B applications that pay the highest wages, and will require companies to pay workers on L-1 visas the prevailing wage, in an attempt to reduce the incentive for hiring foreign nationals over Americans. The Bill also includes provisions for strengthening wage protections of US workers, reduces H-1B visa status from a maximum of six years to three, and gives more discretion to the US department of labour to investigate H-1B employers and collect backwages on behalf of a worker, according to a policy brief by the American Immigration Lawyers Association.

Last month, senator Chuck Grassley (who has introduced several Bills over the past many years to limit and further regulate business visas) wrote to secretary of state Hillary Clinton and secretary of homeland security Janet Napolitano requesting a thorough investigation by the departments of state and homeland security of the B-1 visa programme, “…to make sure that the B-1 visa programme is not being abused by employers who wish to get around the annual caps and prevailing wage requirements imposed by the H-1B visa programme". In his letter, Grassley also referred to Jack Palmer’s complaint against Infosys Ltd and the company’s use of B-1 visas.

In its response, the state department said it, along with the department of homeland security, was considering “removing or substantially modifying the B-1 in lieu of H"—which falls under the B-1 category of business visas that had particularly concerned Grassley.

Such reactions have already begun to have a serious impact on India’s information technology (IT) industry, which received a sector downgrade in a report from brokerage CLSA Asia-Pacific Markets on Monday. “We see the visa issue fundamentally altering the business model for Indian techs with its operational (inability to staff projects on time) as well as commercial (higher visa/subcontracting costs) impact," the authors of the report, Nimish Joshi and Arati Mishra, wrote.

According to the report, visa rejection rates for “tier-1 Indian techs" have increased from 5% to 40% in only 18 months. It adds that at least one tier-1 company has not received a single B-1, L-1 or H-1B visa for any of its employees in the past four-and-one-half months. The report does not name the company. “ events are piling up and we now see visa issues as a game changer for the Indian IT Industry," the report concluded.

“This is potentially very serious," said Peter Bendor-Samuel, founder and chief executive of consultancy firm Everest Group, talking about the implications of probe against Infosys.

In February, Palmer, a US-based consultant for Infosys, filed a lawsuit in an Alabama court alleging that the firm was sending Indian employees to the US to work on projects on short-term non-employment visas (B-1). Palmer alleged that Infosys was doing this to circumvent increased restrictions around work visas, especially the H-1B category. Infosys declined comment on the Palmer case.

The Palmer case and a subsequent department of justice investigation against India’s second largest IT services company have highlighted the use of questionable strategies by Indian IT companies to circumvent an increasingly conservative visa regime that restricts work visas in the US.

Bendor-Samuel said that what is worrying is not just the changes in immigration policy that could take place following the probe against Infosys, “but if the ongoing investigation finds Infosys or other IT companies to be bending the law or fall under the cloud of suspicion, they could have a hard time getting any visas approved".

The $60 billion (nearly Rs2.7 trillion) Indian IT export industry draws almost two-thirds of its revenue from the US and its business model is closely tied to the ability to have free movement of talent across the world. “This is election season in the US and the unemployment rate is hovering at 9%. This issue could easily escalate," Bendor-Samuel added.