On January 20, when Donald Trump takes oath as the 45th President of the United States, the Indian information technology (IT) sector will brace itself for some unpleasant news, mainly in the form of a tighter immigration policy.
There are three ways in which it could go – status quo, which in a way is good news; a more relaxed policy, which seems a distant dream; and a tighter one, which is what the IT industry is fearing most.
Tighter immigration laws to protect local jobs in the US for the blue collared Americans was one of Trump’s loudest rally calls in the run up to the November 8 election, which saw him defeat Democrat candidate Hillary Clinton, despite the latter winning nearly 3 million more popular votes.
“I will direct the Department of Labor to investigate all abuses of visa programmes that undercut the American worker,” Trump had said in one of his speeches.
The fear of a tighter immigration policy under Trump is not completely unfounded. One of the first Cabinet appointments announced by the President-elect was that of Senator Jeff Sessions as the next attorney-general. Sessions, a former Army officer, is known to be a strong advocate for tighter immigration laws.
Trump’s chief strategist, Steve Bannon, has lamented the fact that “two-thirds or three-quarters of the CEOs in Silicon Valley are from South Asia or from Asia.”
Indian IT majors, including Tata Consultancy Services (TCS), Infosys and Wipro, earn a little over half of their revenues from the North American market, mostly the US. Hence a tighter immigration policy will have a direct bearing on their earnings.
The Indian IT sector exports IT services to the tune of $105 billion a year.
According to industry body, the National Association of Software and services Companies (Nasscom), the rising demand for software engineers in the US from countries like India is mainly due to the shortage of STEM (science, technology, engineer and math) graduates in the American market.
Around 2.8 million posts in the US are lying vacant due to shortage of STEM graduates, said Shivendra Singh, global trade development head, Nasscom. “Over the last five years, we (Indian IT sector) have created 411,000 direct jobs in the US, contributed around $20 billion in local taxes, and invested around $2 billion.”
But Singh said the hiring of highly skilled workers is not the same as immigration. Under H-1B visas, 65,000 workers and another 20,000 graduate student workers are admitted to the US each year. But it does not ensure permanent residency. H-1B visas are assigned through a lottery once a year by the US Citizenship and Immigration Services. In 2016, companies filed 236,000 petitions for the 85,000 available visas. The visas are given to employers – not employees – and tied to specific positions.
The timing couldn’t have been for more inappropriate for Indian IT. The sector has been under pressure for a good part of the current financial year (2016-17), and every major company is expected to close the current fiscal with single-digit growth in revenue.
TCS, Infosys and Cognizant have all indicated in the recent past that the growth for the rest of the year will be muted at best, with Infosys and Cognizant even revising their revenue guidance for the full year to a little less than 10%.
Recently, Nasscom had revised the overall revenue growth forecast for the industry to 8% to 9%, from 10-12% projected earlier.
The recent downward revision in revenue forecast is also partly due to the uncertainty following Britain’s decision to leave the European Union (Brexit) in June this year. Britain constitutes nearly half of the $30-billion of IT exports from India.
The sector is also increasingly moving towards a business environment, which will not be based on the cost advantages directly tied to the immigration policies. Large players like Infosys are foreseeing a future where jobs, which are currently cost-price dependent, will get automated, and human workforce will be needed more for delivering value and innovation.