H-1B visa crisis, a perfect storm for Indian IT industry

AMERICA remains the Mecca for highly skilled technology professionals seeking to carve a space in the cutting-edge sunrise sectors. One route to this prized destination has been through Big Tech or Indian software firms which provide the requisite visas. The most sought-after work visa is the H-1B which is valid for about six years. Its limitations are the cap on the numbers and the lottery system used to select the recipients. The advantage is that it often leads to a green card and even citizenship in the long run.

The list of tech leaders who have started their careers on H-1B visas is long and illustrious. It includes Tesla chief Elon Musk, Microsoft CEO Satya Nadella, Google CEO Sundar Pichai and the founders of Nvidia and Zoom Jensen Huang and Eric Yuan, respectively.

The role of these visas as the entry point for the best and the brightest to reach the US has come under threat with the Trump administration's levy of a one-time charge of $1,00,000. The flurry of speculation on the fallout may become outdated soon as clarity emerges on the fine print of the decision. The initial plan for it to be an annual fee was quickly transformed into a one-time charge on companies. Other aspects may also alter soon as Big Tech leans on the White House to soften the blow.

Make no mistake, the biggest impact is going to be on American technology companies. The top 10 firms sponsoring H-1B visas include only one Indian company — TCS. Amazon tops the list with over 10,000 visas in 2025 while TCS is far behind with 5,500. Other tech giants like Microsoft, Meta, Google and Apple are much lower down in the ranks.

This does not mean that the Indian software sector will not be hurt by this development. But the financial ramifications will be bigger for US-based tech majors. It is a huge dampener, however, for young entrants to the technology sector in this country. With as many as 71 per cent of H-1B visas being held by Indians, this is bound to hurt those who seek to reach the global hub of technological innovation. In the new scenario, only the most outstanding will now have a chance.

The question is whether more jobs would be offshored and it would actually create a bonanza of more global capability centres (GCCs) in this country. The answer to this is not straightforward. First, tech majors have already been assiduous in setting up GCCs in this country. Hiring for these centres has been going on at a frenetic pace in the last few years. In fact, there have been reports that Big Tech has actually expanded jobs in India over the past year as part of a cost-cutting exercise. Ultimately, it is cheaper to hire skilled talent in this country than in an advanced economy like the US. Besides, the availability of skill sets in the science, technology, engineering and mathematics (STEM) field is far greater here. India and China are reported to lead in terms of STEM graduates, with the US lagging behind in this regard.

Second, those being given H-1B visas are already considered to be in the high achiever bracket and capable of thriving in the US ecosystem. Others with lesser skill sets are sought to be absorbed in the GCCs already set up here. Tech majors, thus, prefer to bring high achievers to Silicon Valley where their contributions can be far more valuable and effective.

Similarly, for Indian companies, the on-site requirements of clients for IT services will continue to be at a relatively high level. The consequence of the high fee will thus either make such services more expensive or reduce profitability. In the long run, it could affect services exports that have been a major contributor to the economy.

Thus, for both US-based tech majors and Indian companies, hiring strategies will have to be recalibrated on the basis of a cost-benefit analysis of the one-time fee. If it continues for a prolonged period, they may have to cut back on the numbers being sponsored for this visa. Other visa options are available, like the L1 and the O1, but these have conditionalities and cannot be used by all applicants.

Thirdly, if offshoring becomes inevitable owing to the high financial burden of sponsoring H-1B visas, there could conceivably even be curbs in that area. An American legislator has already sought to pass a Bill to tax companies that outsource services.

In other words, this is a perfect storm for the Indian IT industry. Its phenomenal growth has been based on exporting software services and the H-1B visa has been an integral part of the game plan.

Yet, crises always throw up opportunities. This is a time when both the government and industry must join hands to create an enabling environment for high tech innovation and research. While Bengaluru and Hyderabad have been described as the Silicon Valleys of India, they have not lived up to the promise of nurturing cutting edge technology. The reputation of the Indian IT sector is that it has failed to do ground-breaking work and has been following innovations made in other countries.

This is despite the fact that Indian talent located in the US has taken the lead in the digital and AI arena. There is no doubt that the scenario in that country is conducive to research, development and launch of new ventures. Such conditions need to be created in this country to utilise the wealth of talent available here. The biggest hurdle, however, is bureaucratic red tape that tends to bog down efforts to foster innovation.

The industry must share a part of the blame. Indian companies have historically been reluctant to invest in research and development. The creation of an enabling environment for the vast pool of STEM graduates in this country is thus a goal that needs to be set sooner rather than later. If Trump's visa diktats serve as an incentive for such a process to begin, then these have served a useful purpose.

Sushma Ramachandran is a senior financial journalist.