The proposed suspension could bar any new H-1B holder outside America from coming to work until the suspension is lifted, though visa holders already in the country are unlikely to be affected, a Wall Street Journal report said.
Indian IT companies widely use H-1B visas to transfer highly-skilled workers to the US. India has been the only country that takes 70% of the 85,000 H-1B visas applied annually, according to market reports. The news about visa suspension comes at a time when the US visa rejection rates for Indian IT companies have been on an upswing, rising 24% in 2019, up from just 6% in 2015.
If employment visas are suspended, large Indian IT services companies like Tata Consultancy Services (TCS), Infosys Ltd and Wipro Ltd will be forced to increase their local hiring in the U.S. which, in turn, would eat into their margins.
For TCS, which operates in over 50 countries, the US is the largest market in terms of revenues.
“As for H1B, I have always maintained that visa regulations will continue to change and evolve...TCS has a large number of local professionals in every country in which we operate, as a measure we undertook several years ago, and we continue to balance the resource mix," said N Chandrasekaran, chairman of Tata Sons, addressing shareholder concerns during its AGM on Thursday.
Industry body Nasscom said on Friday, “...We seek exemption for technology workers as essential workers, from any restrictions that may be imposed in a second White House Proclamation."
Employee expenses account for nearly 60-65% of total operating costs for large IT services companies.
“Operating margin is forecast to decline 30-80 basis points for the sector in fiscal 2020 as local hires increase for onsite job, who cost 25-30% more than their H1-B counter parts," rating agency Crisil said in a 2019 report.
As part of its localisation efforts, Bengaluru-based Infosys hired 78% of its senior management staff locally in FY20.
Infosys recruited over 6,932 employees locally in its markets, of which 2,035 were fresh graduates during FY20. “92% of the hires made in each location are principally local," Infosys stated. “We are making steady progress in our local graduate hiring and internship programs in countries like Mauritius, Germany, the UK and the US…We place increased emphasis on recruitment of visa-independent lateral hires," Infosys said.
Wipro employs more than 41,000 employees located outside India. Its customer-facing functions in markets such as the US, Latin America, Continental Europe, the UK, India, the Middle East and Africa are predominantly locally staffed, a 20F filing with the US Securities and Exchanges Commission (SEC) said.
Analysts believe increasing local hiring will be the only way to fill up the roles if such employment visas are banned.
“However, I believe this is just an election rhetoric…The US will continue to have programmes to bring in skilled workers from India and other countries. Even if the ban is imposed, it is likely to be for the short-term," said Siddharth Pai, IT analyst and venture capitalist.
Tech policy consultant Prasanto K Roy said US trade bodies will push back hard, because they need talent as the US economy rebounds.
“...Shutting off H1Bs would bring a lot of services to a halt, affecting financial, travel and other key services. Not immediately, because there are H1B visa holders in the US now and they will remain. But any projects or key functions that are affected because of lack of talent will cause a bigger local push pack in the US," Roy said.
India has been constantly engaging the U.S government on permitting skilled Indian workers to stay on in the US, pointing out that highly skilled Indian professionals are also engaged in the fight against covid-19 in various fields including medicine and developing solutions to fight the pandemic, Harsh Vardhan Shringla, foreign secretary of India, said on 3 June.
(Romita Majumdar contributed to this story