Indian IT Companies crashed with the Doubling of H1B Minwage

Feb 01 2017 10:49 AM ,   Madhurima Chowdhury  , No Comments

IT SectorThe introduction of bill in the US House of Representatives calling for more than doubling the minimum salary of H-1B visa holders to $130,000, from the current $60,000 proved to be hazardous for the Indian IT sector.  This is more than double of the current H1B minimum wage of $60,000 which was established in 1989 and since then has remained unaltered. Within one brutal hour, stocks of Indian IT companies collapsed, sweeping over Rs. 50,000 crore in the market value of top companies. Such steep rise in minimum salary will make it difficult for Indian IT companies to employ people on H-1B visas to work on projects in the US, which contributes 60 per cent of the export revenues of the Indian IT sector.

IT stocks reacted negatively on the National Stock Exchange since investors feared over US President Donald Trump plans to keep his electoral promise of implementing tougher immigration rules on the H1B visa plans. On 31st Jan, TCS share price fell 5.6 per cent, Tech Mahindra share price 9.7 per cent, HCL Tech share price 6.3 per cent, Infosys share price 4.6 per cent and Wipro share price 4.23 per cent. 

Intraday on Tuesday, though TCS, Wipro recovered marginally whereas HCL Tech share price is trading at a fall of 0.34 per cent.

Indian companies have been employing more US citizens in the anticipation of H-1B visa curbs. But employing more US citizens will automatically increase the cost for Indian outsourcers. As a result it will impact their margins and overall profit.  The Indian IT industry is already struggling in the form of slow growth amid big changes in the technological landscape (like automation and artificial intelligence) and global headwinds like Brexit.  On the other hasnd, with most of the projects now on digital or cloud platforms, the need to send employees on H-1B visas will also go down.

US President Donald Trump is set to sign a new executive order aimed at mending programmes like the H-1B and L1 that will make it tougher for foreign workers to get work visas. Around two-thirds of H1B visa applicants are Indian nationals who either work for Indian IT services firms such as TCS, Infosys and Wipro or the local operations of US firms such as Accenture, IBM and Google.

The High-Skilled Integrity and Fairness Act of 2017 incorporated by California Congressman Zoe Lofgren in the US Congress suggest removing the ‘per country’ cap for employment based immigrant visas. As a result all employees will be treated more fairly and to enhance the system where employers hire the most skilled workers without regard to national origin. The legislation sets aside 20 per cent of the annually allocated H-1B visas for small and start-up employers (50 or fewer employers) to ensure small businesses have an opportunity to compete for high-skilled workers, while still protecting against outsourcing.

Talking about the H-1B visa, it is a non-immigrant visa that permits US companies to employ foreign workers in speciality occupations that require theoretical or technical expertise in specialized fields. The technology companies depend on it to hire tens of thousands of employees each year.

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