U.S. visa pain would go beyond Indian IT giants

December 16, 2015

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

India’s IT industry is once more a punch bag for U.S. politicians. American lawmakers are touting fresh attempts to restrict visas for skilled foreign workers. That’s a big threat to Indian IT giants like Tata Consultancy Services and Infosys – but the pain would not stop there.

Ted Cruz, a contender for the Republican presidential nomination, is the latest to take aim. He effectively wants to set a minimum salary for visa holders at $110,000. That’s around one third more than the average paid in 2013, data from Indian industry body Nasscom shows.

Other senators from both parties want to cut the number of visas available each year by 15,000 to 70,000, and to stop companies that already have half their local workforce on such visas from getting any more.

The industry has been here before: similar reforms failed to pass in 2013. The current proposals are unlikely to get further in the short-term but such restrictions would be a worry if the Republican Party won the presidential election next year.

Information technology is a crucial Indian export. In total, the sector makes up more than a quarter of India’s international trade. At $69 billion, TCS is India’s most valuable publicly listed company.

Overall, software services accounted for $82 billion worth of exports in the fiscal year ending in March 2015, according to the Reserve Bank of India. And the U.S. market is critical: almost 60 percent of that figure came from North America. Geographic diversification is challenging.

In the past, New Delhi has made it clear that any blow to its outsourcing industry would make the country less receptive to helping American companies that run into trouble in India. Such tit-for-tat reprisals would carry more weight now, given that Indian has just relaxed foreign investment limits in multiple areas ranging from defence to insurance.

There could be workarounds if America clamps down. Indian giants could make acquisitions to boost their local headcount, for example. Ultimately, though, higher wages and fewer visas would hurt home-grown rivals like Accenture and IBM too. India’s IT outsourcers will hope that the prospect of shared pain will be enough to keep any overhaul at bay.

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