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Indian IT companies to feel Infosys visa pinch

business Updated: Oct 31, 2013 11:16 IST
Indian IT industry

Wednesday marked the beginning of a new chapter both for Indian information technology companies - and bellwether Infosys. On this day, Infosys, India's second-largest IT services exporter, agreed to pay a fine of $34 million (Rs 207 crore) to the US Justice Department to settle a visa fraud dispute.

Though the actual amount of the fine is hardly likely to dent the balance sheets of Infosys, but the brand value - of both Infosys and the Indian IT industry as a whole - is bound to suffer erosion.

Aware of the increased scrutiny of their visa use, Indian IT players had already increased the hiring of local residents in the US, and this may gather momentum in the coming months.

But analysts who track the IT industry say that the practice of getting employees on temporary business visas is not "uncommon", and that both Indian and multinational companies are known to practise this across the world.

Milan Sheth, an analyst at EY, a consultancy, said that the issue is not of just visa fraud.

"This is an entirely trade’related issue," he said. Each company needs to move its employees from one country to another to conduct its business, but then barriers (in the form of visas) are put up by governments that restrict these movements, he pointed out.

Even large multinational firms, when they send their executives to India, have often been found to violate visa norms. They get away lightly simply because India has a liberal visa policy.

"If India imposes restrictions on the workforce from multinational firms, then a lot of them can come under scanner for Indian visa violation rules," an industry analyst said.

Ankita Somani, an analyst at Angel Broking, said Infosys had already made a provision of $35 million in relation to the case in its accounts, so the actual payout should not make much of a difference operationally.

"However, this case could have some impact on its brand image, especially since Infosys in the past was known for best corporate governance," she said.

The question that remains is whether India will take up with the US, the issue of work visas at the diplomatic level.
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