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Hike in US visa fee not to have major impact on Indian IT firms, say analysts

The hike in visa fees by the US will not have any major impact on the Indian IT industry since the quantum of hike is not significant, say analysts.

On Friday, the US Congress doubled visa fees to $ 4,500 on the H-1B and L-1 visas citing that it will be used to fund a 9/11 healthcare act and biometric tracking system, even as President Barrack Obama’s term is coming to an end. The US House of Representative is slated to vote on the $1.1 trillion spending bill deal on Thursday.

 Hike in US visa fee not to have major impact on Indian IT firms, say analysts

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The increased fee will apply to all companies who have at least 50 employees with 50 per cent of them on H-1B or L-1 visa, the notification said. These companies will now have to pay a new fee of $ 4,000 for H-1B visas and $ 4,500 for L-1 visas.

The move isn’t an unexpected development as in the recent months the US Congress has been considering to cap H1B visas to 195,000 to ensure job opportunities for local citizens.

The Indian IT sector has its largest market in the US and earns around 60 per cent of their revenues from there, according to analysts. However, the current hike in visa fees alone is unlikely to cause any major negative impact on the sector, analysts pointed out.

“The IT firms will pass the extra money they have to incur on visa fees to their clients,” said Sanchit Gogia, Chief Analyst & CEO of Greyhound Research, an independent IT and Telecom Research and Advisory firm. Gogia points out that IT firms have adequate income flows and margins that can absorb this fee hike.

Infosys, India’s second largest IT firm, gets the major chunk of its business from the US. N R Narayana Murty, Infosys founder said on Friday (December 18) that he does not consider the hike in visa fees an issue at all. “$2,000 or $4,000, that doesn't matter. The important thing is that you have to provide excellent value to customers," Murthy said.

There is a positive side to the visa fee increase issue. From an earlier provision of five years from 2010 to 2015, it has now been increased to 10 years.

If one were to take into account other factors such as inflation, for instance, over the last five-year period, then the rise in fees is not humongous to affect the IT industry, says Vikash Jain, Partner and Director, Boston Consulting Group. "I feel this is largely a sentimental issue," he said.

The matter of concern for Indian IT firms would be if there are complexities in procuring the visas, said Jain.  If and when that becomes an issue, the matter would require prompt government intervention. The expenses with regard to complexities in getting work visas would also, among others, include the cost of hiring lawyers, he added.

Some sections of the industry and industry bodies said that despite PM Narendra Modi recently sharing the concerns of the Indian IT industry with regard to legislation while it was under progress, with US President Obama, it did not translate into any benefit for tech firms. However, with Obama’s term coming to an end soon, it is too much to expect that there will be a change in rules that will favour the industry, points out an IT industry expert.

It would be unfair to say that Indian IT industries presence in the US does not benefit America. There are ancillary industries such as tours and travels, housing, hospitality and others that thrive because of the large presence of non-US IT firms in the US. “If the non-US IT companies presence will be pruned, the existence of these ancillary industries too will be threatened,” said Gogia of Greyhound Research.

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Updated Date: Dec 21, 2015 11:29:25 IST