Assocham predicts layoffs in Indian IT companies after Trump’s H-1B visa order

With the US tightening the norms for H-1B visas under the President Donald Trump's 'Buy American, Hire American' campaign, the Indian IT companies are bound to face disruptions by way of higher costs and even some laying off work force back home, and the rising rupee is aggravating the situation further for the technology export firms, an Assocham paper recently said.

Nearly 86% of the H-1B visas issued for workers in the computer space go to Indians and this figure is now sure to be scaled down to about 60 per cent or even less, the paper said.

Remittances from the US would decline, hurting the balance of payment. World Bank data showed the US was the second largest source of remittance for India in 2015, behind Saudi Arabia, and about $10.96 billion, nearly 16% of the total inflows, were sent to India.

The industry chamber expects it to disturb the balance by 8-10%.

As the cost pressure would increase, aggravated by rising rupee leading to lower realisations, the Indian IT firms may be forced to displace work force. "In that case, the chances of layoffs are real," said Assocham Secretary General D.S. Rawat.

He said the IT industry apex organisations and the government need to work out a joint strategy to deal with the unfolding situation.

In the last three months, the Indian currency has gained by at least five per cent against US dollar, reducing net realisations for software exporters, among other export-oriented sectors.

According to the Assocham paper, the reverses resulting from the tightening of the H-1B visas would force IT giants to effect fundamental changes in their strategies in terms of hiring, salaries, jobs, impacting employees in India too.

With Britain already hiking the minimum wage requirement to euro 35,000 for tier II visa immigrants, this latest move by the US will act as a definitive dampener to the Indian outsourcing industry.

The alternate solutions for the Indian outsourcing industry are: Investing "near shore centres" - facilities close to the US; focus on local hiring in America; and to work virtually, which is becoming easier with the wider adoption of cloud services and greater digitization, the paper said.