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H1-B Visas Indian IT industry Not Worried

November 2003
H1-B Visas Indian IT industry Not Worried

The slashing of the H1-B visa quota to the U.S. has not evoked much trepidation here. While nobody is sure exactly how the dynamics are going to play out, many say that the move will hurt the U.S. economy in the longer run as its firms will only end up outsourcing (read exporting) more jobs.

The H1-B visa users have been criticized by unemployed American professionals for "taking away" their jobs. H1-B is the "specialty occupation" visa status under which a large number of IT firms send their employees to the United States for on-site project development work (popularly known as body-shopping).

While this has always been lucrative for Indian IT firms, the U.S. government has slashed the visa quota from the existing 195,000 to 65,000, effective October 1, 2003, causing widespread speculation about the impact, adverse or otherwise.

The U.S. is the prime export destination of the Indian software industry where export revenues clocked an annual growth rate of 45 per cent, jumping from $164 million in 1991 to $10 billion in 2002.

Almost 50 per cent of the H1-B visas issued worldwide last year by the U.S. went to Indian professionals. India is also currently the second largest source, after Mexico, of legal immigrants to the U.S.

After the cut some people have expressed concern about the future of India's dollar-spinning software industry. There are reports of many companies accumulating visa-ready people, apprehending that the non-availability of visas may upset their customers' delivery schedules and hamper project work.

"We are not really worried about its impact on the Indian industry in the short-term. But if the level of 65,000 is maintained for a long time, it will have a fallout," said Kiran Karnik, president of the National Association of Software and Service Companies (Nasscom). "the export prospects of smaller and newer companies will be badly hit."

Karnik and many others in industry, however, are optimistic about the U.S. again raising the cap. ''The U.S. economy has been facing a shortage in software skills along with a shortage of manpower in other areas such as heath and academics. I am sure once the U.S. economy picks up, the H1-B visa cap may be increased,'' Karnik said.


The other question, however, is whether the reduced quota will actually result in the empty slots being filled by unemployed Americans, which was the original intention of the cut as spelled out by Republican Congressman Tom Tancredo who spearheaded the movement against H1-B visa users. The indications are negative.

The U.S. Chamber of Commerce has pleaded that the cap of 195,000 H1-B visas be retained to help maintain America's global competitiveness. "It is unclear what, if any rationale was used in developing this cap. What is clear is that the cap will cause great economic hardship to U.S. employers," a spokesperson for the Chamber said.

He debunked the theory that H1-B workers displace American workers and lower American workers' wages and working conditions in certain job sectors. "It is hard to displace U.S. workers when you don't have any U.S. workers to choose from.���If the government refuses to recognize market needs and demands, the only alternative for American companies will be to move more of their operations offshore,'' the spokesperson said.

Indeed, some reports suggest that even U.S. President George W Bush was against the cut.���At a private reception attended by Indian Americans in Jackson, Mississippi, Bush is reported to have opposed strongly House Resolution 2688, the bill introduced by Tancredo to reduce the quota.

Bush reportedly said, "Tancredo and I are at opposite ends of the pole. I fully do not support Congressman Tancredo's bill against H1-Bs."

It is apparent that the President understands that the current unemployment situation in the U.S. is not due to H1-B visa holders taking American jobs. Several industry leaders in India have predicted that the cut will help accelerate job exports to India.

Prasad Jagatjit, VP (HR) at i2 said the move would boost off shore work done in the country. At a recent seminar on outsourcing of IT work to India, KPIT-Cummins Infosystems chief Ravi Pandit described this transition as the "maturing" of the Indian IT industry as it moves from body-shopping to the higher level of working on outsourced projects.���

Avinash Vaishista, CEO of neoIT, an outsourcing advisory, said, "Putting a cap on H1-B visa, gives off-shore work a big shot in the arm. The restriction on importing skilled manpower will push companies to do more off shoring work in India."���

Karnik said employers in the U.S. currently need and would continue to need H1-B workers.���"The H1-B visa program has been very useful for U.S. companies. It's an issue for U.S. industry to take up. By reducing the cap from 195,000 to 65,000 you are artificially suppressing market forces," he said. Several other industry leaders have expressed similar sentiments.

To further buttress confidence of Indian industry, in a new survey by management consulting firm A T Kearney, North American automotive executives have picked India over China as the most popular offshore destination for the migration of business processing activities.

It is now becoming increasingly clear that the cap on H1-B visa was an emotional reaction to the situation of high employment in USA. As they say in India, the target was somewhere, the aim somewhere else.

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