Can US midterm elections give Indian tech firms a breather?

The results of the US midterm elections dealt a major setback to the Trump administration, with Republicans losing control of both the Senate and the House of Representatives. The newly elected lawmakers will take office on January 3, 2027. For Republicans, whose anti-immigration stance and America First policy have driven trade protectionism and a greater emphasis on US workers over foreign labour and international competition, the election results could bring greater congressional oversight and accountability.

For the Trump administration, the H-1B visa programme has been a key focus. Last September, a presidential proclamation sought to impose a $100,000 payment requirement on certain new H-1B petitions for workers entering the US from abroad. The measure caused widespread concern among employers. However, its implementation was subsequently blocked by a court order, even as the administration extended the proclamation for another year.

More recently, ahead of the midterm elections, the US Department of Labor suspended eight technology companies from filing new applications or processing pending applications under the Permanent Labour Certification (PERM) programme, which allows employers to sponsor foreign workers for permanent residency in the country.

Ahead of the US elections, Dr Amitendu Palit, Senior Research Fellow and Research Lead (Trade and Economics) at the Institute of South Asian Studies (ISAS), noted in a brief dated October 19 that the suspension decision could be seen as a tactic to divert voters' attention from the economy to other issues.

“Indian IT workers are unfortunately the victims of the tactic. The Trump administration’s earlier decision to raise H1B visa fees had already limited chances of migrating to the US. The residency suspension ends most of the remaining possibilities to the idea. The ‘American Dream’ of moving to the US through the H1B route and getting a green card is over for all practical purposes for several IT workers, at least for the time being,” he wrote.

US Vice President JD Vance, who was present alongside Labour Secretary Keith Sonderling when the suspension was announced, said the department would not accept new or process pending PERM applications involving Cognizant, Infosys, Tata Consultancy Services (TCS), Wipro, HCL Technologies, Capgemini, Microsoft and Adobe.

However, TCS, HCLTech, Wipro and Infosys, in their exchange filings, played down the potential impact of the PERM suspension, saying they had built a significant local workforce in the US. Wipro said more than 80% of its US workforce comprised local hires, while TCS said it planned to hire 15,000 workers in the country over the next five years.

The Brookings Institution, in its commentary titled ‘The midterm effect: What the 2026 election could mean for public policy’, dated October 22, noted that a Democratic-controlled Congress could curb the executive powers of Trump. Experts said that if Democrats took control of the House, they could use their oversight and investigative powers to hold the president accountable for his policies.

“But even more important, a Democratic-controlled Congress could challenge the president’s actions at every turn, slowing and perhaps halting the steady expansion of executive power since the beginning of President Trump’s second term and making it more difficult for a subsequent president of either party to follow in Trump’s footsteps,” they noted.

However, industry experts Fortune India spoke to do not see any material change for the Indian technology sector. The Trump administration's orders affecting IT services companies are likely to continue, although the tone of its approach could soften.

Restrictions and regulations around H-1B visas have been a feature under both Democratic and Republican administrations. For instance, under former US President Barack Obama, Democratic Senator Chuck Schumer was instrumental in pushing immigration reforms aimed at preventing the misuse of H-1B visas and expanding the Department of Labor's powers to investigate fraud and misrepresentation related to the programme.

That said, while Trump retains the power to veto legislation passed by Congress, a Democratic-controlled Congress could tighten budgetary oversight, demand explanations for administrative decisions and increase scrutiny of the administration. Such checks could also influence decisions on foreign policy, including the ongoing conflicts that have implications for global markets.

During recent earnings calls, management teams of several Indian IT services and consulting companies said enterprise discretionary spending remained under pressure, with the ongoing conflict in the Middle East adding to concerns. Experts believe that while there is unlikely to be any immediate change, losing control of both chambers could put pressure on the administration to pursue negotiated solutions.

On the trade front, Congress has constitutional authority over foreign commerce and tariffs, although presidential powers under existing trade laws also play a role. A Democratic-controlled Congress could seek greater scrutiny of trade measures and push for more predictable policies. However, any legislative move could face a presidential veto.