The path to the American dream is narrowing for Indian tech workers

Now that the Trump administration has announced a $100,000 fee for new H-1B applications, her future is in doubt. Puppala, who took on $120,000 in loans to study in America and has been working at a Boston firm on a permit that allows foreign students to work temporarily in the U.S., had dreamed of running her own startup.

“What do I do now?" she asked herself when the news broke.

Indians make up about 70% of the recipients of the H-1B skilled-worker visa that is widely used by the tech industry and has historically been a major pathway for foreign professionals to enter the U.S. Now, they stand to be the most affected as the Trump administration overhauls the program to address concerns that American tech workers are losing out on jobs to immigrants.

Indians were “highly, highly responsive" to the H-1B program when it was introduced in 1990, said economist Britta Glennon, an assistant professor of management at the Wharton School whose research has focused on immigration and innovation.

Over the years, Indian families often urged their children to pick studies—particularly engineering—that would give them the best shot at jobs. An elite network of state technology schools modeled on the Massachusetts Institute of Technology helped produce top-notch English-speaking computer experts and engineers, who have been in hot demand in the U.S.

The prominent success of Indian computer scientists and engineers who held H-1B visas encouraged students in India to invest in similar degrees, said Glennon. Noteworthy among them: Alphabet CEO Sundar Pichai. By 2003, Indians accounted for more than a third of successful H-1B applications.

By 2007, with demand for the visa outstripping the available spots, the U.S. government introduced a lottery system to award them. The new system prompted Indian outsourcing-services firms—which provide technology services to American clients through a mix of U.S.-based workers and teams in India—to flood the system with numerous petitions to increase their chances of securing H-1B visas, according to analysis by economists Rishi R. Sharma and Chad Sparber of Colgate University.

Over the years, Indian outsourcing firms then contracted out their extra U.S.-based Indian workers to clients, leading to complaints from American workers that they were being replaced by domestic outsourcing.

“This was not their business model in 2003," said Glennon.

U.S. workers have filed several complaints before the Equal Employment Opportunity Commission about Indian tech giant Tata Consultancy Services, the country’s biggest tech-services firm, alleging the company fired them and replaced them with H-1B workers.

TCS was granted 5,500 H-1B visas last year, second to Amazon, which had more than 14,000. The annual quota is set at 85,000 visas. Universities are exempted from the cap.

TCS didn’t immediately respond to a request for comment. The company has said the complaints are meritless and that it has a strong record of being an equal-opportunity employer in the U.S.

Economists say that salaries for H-1B hires at outsourcing firms are also on the lower end of the scale for these types of roles, although they are obligated by law to show that they are paying above a certain wage.

Indian outsourcing firms say they have scaled back their reliance on H-1Bs and have sought to train and hire more Americans.

Now the U.S. is trying to overhaul the program again. In addition to the new fee, which is expected to affect first-time applicants from next year, the administration is also planning to rework the lottery to give greater weighting to higher-paid applicants.

Puppala works for an AI firm called Trial and Error, where she is developing its community platform H1Founders, set up to help tech immigrants start their own businesses and potentially sponsor themselves on other kinds of visas.

Puppala’s boss, Siddharth Sarasvati, said the new fee is a deterrent for a startup like his. The company is looking into other skilled-worker visa options for Puppala.

“H-1B needed reform," said Sarasvati. “But this isn’t reform, it’s a sledgehammer…this ensures that only companies with the deepest pockets can play."

Shah, another H-1B worker based in Boston, said the news has highlighted how vulnerable his position is in the U.S. “Is this country truly home for me?" he said he is asking himself. “Or is it time to go back to the country that, no matter what, will always be?"

Some experts believe India stands to benefit if U.S. visa changes make it harder for Indian tech workers to remain in the U.S. Economists say the rise of India’s tech economy partly stems from the return of professionals who didn’t secure H-1B visas. They helped spur the growth of tech hubs such as Bengaluru, Glennon said.

“Donald Trump’s 100,000 H-1B fee will choke U.S. innovation, and turbocharge India’s," said Amitabh Kant, the former head of an Indian government-policy think tank, in a post on X. “By slamming the door on global talent, America pushes the next wave of labs, patents, innovation and startups to Bangalore and Hyderabad, Pune and Gurgaon."

But while opportunities in India have increased in the past decade, the country has large numbers of tech graduates and many of them struggle to find well-paying jobs. Compared with the U.S., Indian work culture remains much more hierarchical, some tech professionals say. Artificial intelligence could also threaten many entry-level opportunities.

“India has a lot of good schools to train engineers but nothing much to engage them after graduation," said a 31-year-old Albany, N.Y.-based software engineer who came to the U.S. for a doctoral program in 2017. After that, he secured an H-1B visa the first year his company applied for him in 2022.

Being on the visa was more restrictive than he thought, as it means he is tied to one employer, but he says he thrives in the U.S.’s tech culture. Concerns over work-life balance and the hassles of daily life in India mean that he and his wife—also on an H-1B—will pursue other skilled-worker visa options to remain in the U.S. if the crackdown on the program deepens. In the worst-case scenario, they would look into moving to Canada.

“Stories about Indian work culture are discouraging," said the engineer. “Returning to India is the very last option for us."

Write to Tripti Lahiri at tripti.lahiri@wsj.com