With the latest missive from the Donald Trump administration on H-1B visa, cautioning companies against misuse, the immigration issues of the Indian IT sector are back in news. And it is not the US alone that is drumming up protectionism for political gains. However, industry observers say that Indian IT services companies are resilient enough to weather such issues.
“It is an issue of perception about the industry abroad. But this is something all the IT firms in the country can handle, be it local or the MNCs,” says Mohandas Pai, Chairman of Manipal Global Education Services and Aarin Capital and former Chief Financial Officer at Bengaluru-headquartered IT major Infosys Ltd from 1994 to 2006.
On 31 March, the US Department of Homeland Security announced steps to prevent the fraudulent use of H-1B visas, used by employers to bring in specialised foreign workers temporarily. This is one of the poll campaign promise of President Donald Trump. Earlier last year, the UK had raised minimum salary required under the Tier 2 intra-company transfer (ICT) category to 30,000 pounds from the earlier limit of 20,800 pounds. Meanwhile, from early 2016 Singapore also has been holding back permission for work visas for Indian IT professionals. Companies such as TCS, Wipro and Infosys all have a presence in the island nation.
Such moves indeed impact the Indian IT sector, which in 2015 aggregated revenue worth $147 billion, with exports accounting for $99 billion and domestic revenue at $48 billion.
However, experts like Pai says the industry wasn’t caught unawares by the restrictions with regard to H1-B visa or what the Singapore government stipulated.
"We have survived tougher challenges in the past like the Y2K and the Lehmann crisis. I am confident this will not derail our growth,” says Harish HV, Partner, India Leadership Team, Grant Thornton India LLP. He feels the growth estimates for the next two quarters may get impacted with these restrictions.
India accounts for approximately 67 percent of the $124-130 billion US IT market. The sector is expected to grow at a rate of 12-14 percent in 2016-17 in constant currency terms and is expected to triple its current annual revenue to reach $350 billion by FY 2025. In 2015, India’s exports to the US was $108 billion, a Brand Equity Foundation report said.
A few even believe that the IT sector was in need of this course correction. Referring to the latest directive from the US government, they say a substantial number of IT employees who have applied for H1-B visas have been engineering diploma holders from tier 2 colleges and worse, some who have been trained on the job though they come from non-engineering streams.
“It was then right that the US did bring up the H1-B visa issue for it will weed out those who have been misusing the system bringing the IT sector a bad name,” said Pai.
India should not be complaining about the H1-B visa rule change in the US as it has now become more merit-based. “Merit will pay respect to seniority and use-cases. Isn’t that good for the Indian IT sector,” asks Sanchit Vir Gogia, Chief Futurist, Founder and CEO of Greyhound Knowledge Group.
Indian IT firms have been accused of taking Indians even in job roles that could have had local hires in the countries they operate from. Recently, IT doyen Narayan Murthy too pointed out to this anomaly while supporting the Trump administration’s decision to tighten H-1b visa issuance. “I think by and large, the Indian mindset is always to take the soft option. Becoming multi-cultural is a very, very hard option, it's not easy," he said.
Cost is a major factor for not taking in local hires which many say does not ring true anymore with salaries being at par in the IT sector in the US. One of the reasons is cultural. Indians are willing to work late hours and can be contacted on phone or the internet. In the US, the work culture is such that employees largely do not respond to calls or mails after office hours and weekends, too. The IT services companies in India are known for long working hours, much beyond the nine-hour shift.
But to do business in the US and Singapore and any other country that will come out with stricter rules that go against the Indian IT industry, the latter must learn to co-opt locals to survive. “Don’t we have reservations in India? Many states ask for reservation for locals. What is wrong in what the Trump administration is doing or with the Singapore government devising protectionist policies for its people,” asks Gogia. He feels that body shops that ship IT talent which could have been hired locally abroad will be the ones to be hit by the H1-B visa and other rules put out by countries like Singapore.
Nothing wrong at all, except that India boasts of a larger pool of IT talent than other countries across the globe. “Singapore is only hurting itself when it comes with these rules,” remarked Pai. The island nation does not have the talent pool to feed its own industry and hence Indians are hired, said Pai.
“The MNCs who hire Indians and take them abroad to work in these countries is because we have the best IT talent globally. Also, home-grown Indian IT firms choose candidates after a rigorous process. The best IT talent from the Tier one colleges are taken, trained and only after they have proved their expertise are sent abroad,” he says, arguing why Indian IT industry need not fear any restrictions put out by any country. Of the four million professionals working in the IT sector in India, two million are employed by the MNCs. “What does that say about India’s IT talent then,” asks Pai.
When an island nation like Singapore comes out with tight restrictions for the IT sector, Pai believes it will help other markets to open up and use Indian talent to both India’s and that country’s benefit. He predicts Iskandar, Malaysia, to be the next big centre in the region for IT that will use Indian talent. “Iskandar could well become the next hub for IT in Asia,” he said.
Meanwhile, the Indian IT sector will reset their business model and will continue servicing other countries across the globe. “Clients too need Indian IT services and so they will persuade their governments to come up with a solution that will benefit their country,” says Harish of Grant Thornton. “This is not a do or die situation. Indian IT sector will continue to grow and flourish,” he said.
Updated Date: Apr 05, 2017 17:26 PM