Recent decision to hike the U.S. H-1B visa application fee to $100,000 may prompt Indian IT services firms to rethink operating models, a recent Franklin Templeton report released Monday has revealed.

The report has said that this will make Global Capability Centres (GCCs) more attractive options for these companies in the country. As onsite opportunities decline in the wake of rising U.S. delivery costs, these GCCs will be able to offer better talent access and efficiency gains.

“As H-1B lotteries and petitions typically occur in Q4–Q1, the earliest material impact is likely to be reflected in FY27 petition cycles. In response, providers are expected to accelerate offshoring, expand nearshore operations in Canada and Mexico, pursue acquisitions in Europe and APAC to diversify geographically, and invest in automation and AI to enhance productivity. These shifts are likely to make Global Capability Centers (GCCs) in India increasingly attractive to talent, especially as onsite opportunities decline and clients demand better rate realisation and efficiency gains,” the report stated.

In FY24–25, India’s IT sector generated $282 billion in revenues, contributing 7.3% to GDP, with export earnings rising 12.5% to $224.4 billion. The report says that in the short term, firms may see only limited immediate impact due to their already reduced reliance on H-1B visas over the past decade.

Meanwhile, in the medium-term, the report anticipates companies to focus on diversifying their businesses geographically, and investing in automation and AI to enhance productivity.

Indian IT firms such as TCS, Infosys, HCLT, Wipro, Tech Mahindra, and LTI may also accelerate diversification via acquisitions in Europe and APAC. Companies are set to double down on nearshoring their operations to Canada and Mexico. These impact are not going to be homogeneous across firms and will depend on their individual U.S. exposure and onsite workforce mix.

Meanwhile, this IT services sector is set to contribute to market volatility in near-term, with market corrections already seen over the last one year on the back of weaker demand and uncertain policy changes.

The report anticipates that a bilateral deal between India and the U.S. may support growth for the sector, already supported by strong macroeconomic fundamentals and rising domestic consumption.