Move on H1B curbs may hit Indian IT firms

Senate votes to prohibit bailed-out banks from replacing laid-off workers with foreign guest workers.

The Indian IT industry, which recently lowered its growth projections on the back of a slowing economy, sees no immediate impact of the recent US Senate vote to prohibit banks which are bailed out by the government from replacing laid-off workers with foreign guest workers (read H1B workers).

The situation, however, would hurt the fortunes of Indian IT firms if the amendment becomes policy. The top 10 H1B visa list is made up largely of India-based firms, including Infosys Technologies, Wipro and Satyam Computer Services. And the deadline for companies to request petitions for new H-1B visas is April 1. Both US (read Silicon Valley) and Indian companies have repeatedly stressed the need to raise the cap, which was reduced from 195,000 to 65,000 two years ago.

However, Senators Sanders and Charles Grassley (a well-known H1B opponent) recently introduced an amendment that would require bailed-out banks to hire only Americans for two years. This was accepted by the US Senate a day after it was revealed that Americans lost almost 600,000 jobs in January. However, the amendment has to go for 'reconciliation' (a legislative process) before going to Congress and finally the President before it becomes policy.

It is feared that these banks (bailed-out with taxpayers’ money), in a bid to contain or cut costs, would outsource and offshore more work to low-cost countries like India, reducing the chances of American workers of getting jobs. The senate amendment seeks to prevent this, and it could affect the fortunes of the Indian IT industry since outsourcing from the Banking, financial services and insurance sector accounts for almost 40 per cent of its revenue.

“Wall Street caused the crisis, millions of people lost jobs, including 100,000 in financial institutions. Now they want to bring in foreign workers,” Senator Bernie Sanders said in a release. It is feared that the bailed-out automakers too would face a similar diktat. This is another lucrative revenue segment for local IT firms.

Software body Nasscom said that it's up to American banks to choose whether they need to outsource more work to cut costs. “The wording is very confusing. Besides, one may also remember that it is applicable only to H1B dependent companies (an H-1B dependent employer is one whose workers brought in with that visa comprise 15 per cent or more of the employer's total workforce). We hardly have any such IT firms in India,” said Nasscom President Som Mittal.

“There won't be any immediate impact but if the issue persists and becomes policy, then the concern could become grave,” cautions Ganesh Natarajan, Chairman Nasscom and Deputy Chairman and MD of Zensar Technologies. Observers also said that the amendment isn’t as tough as the one Senator Grassley proposed on February 5, which would have prohibited firms from hiring H-1Bs altogether.