US President Donald Trump’s order to suspend new visas from being issued till the end of 2020 might not affect Indian IT industry as much as anticipated. However, Japanese brokerage firm Nomura is of the belief that it wouldn’t be the same post December 2020 if the suspension is extended, especially for Tata Consultancy Services (TCS), Infosys, Tech Mahindra, HCL Technologies, Wipro and Cognizant.
Along with issuance of new visas, even the renewal of existing ones has also decreased at present. “We have already seen a sharp increase in rejection rates for both new visas and renewals over the past five years,” Nomura states in its report.
Nomura elucidates that the new visas account only for 5% of lesser of the entire workforce in the US among Tier 1- IT Services Companies. Similarly, NASSCOM stated that American economy is more likely to be hampered by the move rather than Indian IT firms.
“From a near or medium- term perspective, we don’t see much of an impact because of current situation and travel restrictions,” Tech Mahindra CFO, Manoj Bhat told Business Insider. IT Companies are currently monitoring whether the suspension would be extended
Since the H-1B Denial rates have been rising over the past few years, Indian IT companies have already drifted their focus to localization. The top few Tier-I companies have almost 60%-70% localisation in the US.
IT companies are now keen on analysing the impact of the move. Nomura notes that further increase in rejection rates could lead companies to source talent through sub-contractors or increase localisation. Although companies can pull that off since the US unemployment rates are high at present, they are likely to spend more since locals are 20% to 25% more expensive as compared to H-1B Visa holders.
Indian IT Majors are likely to use these strategies to tackle the ban that has come into effect at present and manage if the suspension is extended.
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