US Visa Fee Hike: Will it affect the Indian IT Industry adversely?

US Visa Fee Hike: Will it affect the Indian IT Industry adversely?

Bypassing a strong objection by Indian information technology firms, US Congress doubled the special fee on the popular H-1B and L-1 visas to USD 4500. R. Chandrasekharan, President NASSCOM has also voiced the deep distress of the IT industry regarding the visa fee hike. But noted IT mentor and Father of the Indian Information Technology Industry NR Narayana Murthy is of the opposite view. Does the visa fee hike spell disaster for IT bellwethers or is the sun still shining? Let us analyse and decode what the visa fee hike will do for the Indian IT industry.

US Visa Fee Hike Will Mar the Indian IT industry

1. NASSCOM decries the hike: NASSCOM has already opposed the visa fee hike and the bill not only has little room for change, it will also be passed quickly

2. Hike will directly hit IT companies: The bill which aims to generate funds for 9/11 healthcare act and biometric tracking system will impact IT companies

3. Rise in costs: US Congress has effectively doubled the charge for H-1B and L-1 Visas costing IT firms an additional USD 400 million each year. Special fee of USD 4000 has been levied on certain categories of H-1B visas and USD 4500 will be charged for L-1 visas over a period of 10 years.

4. Imposition is discriminatory: The imposition is irrational, short sighted and discriminatory highlighting the growing protectionist trend in developed countries like US. US wants India to adopt a different trade and business environment and is against President Obama’s stand for continued openness and ease of access to US markets by Indian service companies as well as advocacy of continued openness of Indian market to US companies.

5. Limits work for IT companies: H-1B and L-1 visas are work permits crucial for Indian IT companies to operate in the US. This is by far the largest market for them. In the case of TCS, US accounts 51% of the revenue. For Infosys, the IT stakes are even higher at 63%. Consider some more numbers. In 6 months leading to September, TCS has earned a revenue of USD 4.2 billion from the US while Infosys has generated close to USD 2.9 billion.

6. Indian firms will not be able to generate jobs in the US: IT majors from India were providing more than 4 lakh jobs in the US of which 3 lakh are held by permanent residents or US citizens. Indian IT firms have invested close to USD 2 billion in 2011-2013 and paid USD 22.5 billion to the US treasury in taxes.

7. Increase in visa fee hike will have direct bearing on operating margins - Top 3 Indian IT companies-Wipro, Infosys and TCS have filed for 46,277 Labour Condition Applications for H-1B visas in FY 2014. With visa costs accounting for 1-1.5% of an IT company’s revenues, so any increase in account will have direct impact on operating margins.

8. Hurts access to technology: Driving up costs will harm access to top quality technology at a time international companies to become more efficient.

9. Costs will pile up: H1B/L1 visa costs around USD 400 million per annum and historical payout will cost USD 10 billion over 20 years.

10. This will mar entry of STEM professionals: Science, Technology, Engineering and Mathematics professionals will find it harder to enter the US and will rob American businesses of access to highly skilled IT talent in India.

11. Higher cost for contracting will move IT operations overseas - Higher costs of hiring or contracting for IT services will lead to movement of IT operations overseas reducing American jobs and tax revenues.

US Visa Fee Hike will Not Harm the Indian IT industry

1. USD 4000 or 2000 does not matter; excellent service available - IT industry is providing excellent value to customers in the US and will continue to do so

2. Legislation only part of a must pass omnibus -US aims to fund a 9/11 healthcare act and biometric tracking as part of these funds. They will improve the image of the Indian IT companies in US therefore.

3. Cost does not cancel profits - While costs will increase marginally, profits will rise thereby boosting the Indian IT industry in the US.

4. Make in India and Digital India will cancel out any impact: The implications of the visa fee hike will be muted because programmes such as Make in India and Digital India will provide the much needed boost for this industry.

Conclusion

The US fee hike will definitely harm the competitiveness and operating margins of the Indian IT industry and efforts are being made by the PM as well as NASSCOM to lobby against this hike. Digital India may have benefits for the Indian software industry, but its prospects abroad will definitely be harmed by the visa fee hike.