Can India’s IT Sector Weather America’s Visa Storm?

ON SEPTEMBER 19, U.S. President Donald Trump signed a proclamation mandating tech firms to pay $100,000 per H-1B visa from next year. The reason? IT outsourcing companies are harming American tech talent by manipulating the non-immigrant visa to import workers with lower wages, according to the White House. Trump claimed giants such as Microsoft and Intel, among others, laid off U.S. workers even as they were bringing professionals on H-1B visas. Without explicitly naming any firm, the proclamation read: “One software company was approved for over 5,000 H-1B workers in FY25; around the same time, it announced a series of layoffs totalling more than 15,000 employees. Another IT firm was approved for nearly 1,700 H-1B workers in FY25; it announced it was laying off 2,400 American workers in Oregon in July.” The fee hike targets fresh visa applications. But the proclamation hints that extension or renewal of existing H-1B visas is expected to come under greater scrutiny starting 2026. Currently, the regular H-1B visa cap is set at 65,000, while the master’s cap (for advanced U.S. degree) is at 20,000. A lottery process decides who gets it. The U.S. move will only have a marginal impact on India’s IT sector, says Nasscom, the tech industry lobby body. The implementation timeline will also give firms time to increase skilling programmes in the U.S. and enhance local hiring, it adds. Pointing out that the IT industry is spending over a billion dollars in upskilling and hiring local talent in the U.S., Nasscom stated, “H-1B is a high-skilled worker mobility and a non-immigrant visa that bridges the critical skills gap in the U.S. Salaries are at par with local hires. Moreover, H-1B workers are a mere decimal point of the overall U.S. workforce.” Mid-cap IT firms such as Cyient, Mphasis, Persistent Systems, and Coforge were quick to issue statements to the stock exchanges saying the Trump administration’s move would not have a material impact on their financials. However, there has been a stoic silence from their larger counterparts. The whole bouquet of IT stocks has taken a beating on the BSE and NSE. Meanwhile, there is consensus among analysts that the H-1B move could trigger increased offshoring, further jacking up the extent of automation and AI adoption at work. Pointing out that ongoing localisation and near-shoring of the workforce have led to a significant drop in new visa applications by Indian IT firms over the past few years, Nomura analysts estimate the worst-case impact at 10-100 basis points on the company margins. They also expect the number of H-1B visas to decrease in the next cycle (FY27F) as companies often do not send all the approved employees in the first year. The employees holding a valid visa on the date could be sent during their visa-holding period. Apart from increased offshoring and automation, the pace of setting up global captive centres in India is expected to accelerate. “H-1B visa use is likely to be restricted to extremely critical roles where localisation of talent is not an option. Even here, the cost increase would be around $33,000/year or nearly 30% (assuming three-year amortisation of additional visa fees),” the Nomura note reads. Indian brokerage house Motilal Oswal shares a similar outlook on expanding offshore delivery or increasing local hiring. But given the magnitude of the fee hike, it expects Indian firms to avoid new H-1B filings altogether. The brokerage also expects tweaks to the business models, where if new H-1Bs vanish, it may lead to the decline of on-site revenues as well as costs. This shift would also improve operating margins, as offshore work tends to be structurally more profitable. “The net effect on EPS could be neutral in the medium term, although top-line growth could be slower. This order is likely to be challenged in U.S. courts and may not survive in its current form,” it adds. InCred Equities, on the other hand, cautions that onsite inflation may lead to higher business cost. It notes that new norms could restrict the free movement of experienced professionals who account for a large portion of fresh visa petitions. These subject matter experts (SMEs) provide specialised knowledge and are critical to project transition and meeting the deliverables. “The regulations could increase the demand for local SMEs and salespersons, leading to material onsite wage inflation. This could be detrimental in the backdrop of the deflationary impact of AI, rising competitive intensity, and upfronting of costs with aggressive deal constructs,” the note says. Now halfway through FY26, even the U.S. economy is treading an inflationary path. The fee hike, amid macro uncertainties and trade wars, will be an additional headwind, especially for firms heavily dependent on Indian and Chinese talent. The jury is still out on the extent to which the move will hurt the Indian IT sector. Fortune India is now on WhatsApp! Get the latest updates from the world of business and economy delivered straight to your phone. Subscribe now.

Can India’s IT Sector Weather America’s Visa Storm?

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