U.S. H1B L1 Visa Fee Hike & its Impact of the Indian IT Sector
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6 people namely Alka, Bhavin, Chandu, Dilep, Eshwar and Fawaz are having a discussion on the topic given above.
Group Discussion Starts
Alka: Good morning friends. The topic we have today is about the impact of the visa tariff hike by the US government on Indian IT sector. In December 2015 the US congress passed a resolution which resulted in hike of the tariff of the H1B1 and L1 visa’s by $4500 i.e. about Rs. 3lakhs extra for one visa.
Bhavin: Yes. According to NASCOM estimates, this move will cost about 400million dollars per year to the Indian IT Industry. The total size of Indian IT industry is about 100 billion dollars. Hence this would result in an incremental cost of about 4% which is very high
Dilep: Different types of visas issued by the US Government always confuse me. Can someone explain me the difference between various types of Visas issued by the US Government?
Alka: Yeah sure Dilep. As you mentioned rightly, there are different types of Visas and the type of visa depends on the purpose of visit. I don’t know about the exhaustive list of all types of visas but I am aware of those that are related to our topic of discussion. The job visas which we are discussing about come under non-immigrant category. It includes H1B which is for specialty occupation and L1 for intra company transfers. There are a lot of other visas like artists, skilled and semi skilled labors etc
Chandu: That’s one issue but there is another big concern for Indian IT industry. A new law is being planned in US which would have even worse impacts on Indian IT industry. The major implication is that the total number of H1B visas will be reduced from 85000 thousand presently to 70000
Dilep: There’s another demand that 50% of the jobs in IT industry have to be given to graduated from American Universities, presently more than 60% of the onsite roles are filled by foreigners
Eshwar: I read that Prime Minister Narendra Modi has spoken to Barack Obama about the tariff hike and asked him to rethink the decision
Fawaz: It is strange that USA despite having a shortage of skilled labor is going for such a move. Surveys have clearly shown that there is a shortage of IT Professionals especially in the field of Science and Technology Engineering projects. An estimate shows that last year about 40% of the projects were rejected because of the lack of skilled labor in those fields.
Alka: It is said that the additional amount that’s going to be collected from the tax hike will be used for 9/11 compensation and health act. I feel the hike is going to be a big burden for the IT Sector of India
Dilep: I don’t agree with you. I would like to quote Narayana Murthy of Infosys who said that the tariff hike is not a deterrent for the growth of Indian IT sector since it is well developed and with the government’s focus on digital India and other developmental schemes the IT Sector will have enough work in India even if the number of H1B visas are going to be reduced to 70000 from 85000
Eshwar: I don’t know if Narayana Murthy is being too optimistic and positive but how can you deny the impact of the bill. At an individual level, each H1B visa and L1 visa is going to cost double for each person, this new rate is said to be applicable till September 2025. So for the next ten years if we calculate the incremental cost, it’s going to cost us about 25000 crores to the Indian IT Industry.
Fawaz: Exactly. Consider this simple number. At present we are paying 100million dollars which has now increased to 400 million and how can you deny the effect of it
Eshwar: yeah, all the IT companies of India felt that it’s a serious damage for them, and the fact that increased amount is not going to be used to IT related expense hurts the firms even more. They feel that it is targeted particularly at the Indian IT firms and that it’s not fair on the part of US Government
Chandu: I also read that if an employee wants an immediate visa i.e. processing time of 15 days or less, a premium of 1200dollars is charged. With most of the Indian companies sending their employees to US at a short notice, this is an additional charge for them
Eshwar: Yes Chandu, moreover Indian IT professionals who go to USA on H1B or L1 visa have to bear additional costs like health insurance and social security which makes it very unprofitable for the individuals and the companies
Dilep: But India is undisputedly one of the global leaders in IT Services. So I believe that this move would in long run hurt USA more than the Indian IT industry.
Alka: And one more important thing we need to consider here is that this is not a completely unanticipated move it’s being discussed since several years hence I feel Indian IT companies would be prepared for such a move, that’s what was clear from Narayana Murthy’s statement about the hike
Dilep: Moreover the extra burden can be passed onto the clients by the IT firms since it’s not a very price sensitive industry. Hence I feel that this move by the US government wouldn’t limit our growth in the IT sector.
The Indian IT sector has had a long serving relationship with USA. A lot of IT professionals have served along with the big multinationals from USA. The sudden increase of the visa fees would impact the Indian IT companies as they would find it difficult to send their employees to US.
Facts about the Topic
• Visa costs for domestic IT industry will go up from $100 million (around Rs 665 crore at 66.50 rupees per dollar) to $400 million (around Rs 2,660 crore) annually,
• The increased visa fee is applicable until September 2025, so the domestic IT industry may end up paying $4 billion (Rs 26,600 crore) over the next 10 years towards visa costs
• The increased visa fee will impact margins of Indian companies, analysts say. Estimates of margin impact vary from 15 basis points to 20 basis points
• Companies having more than 50 employees and having more than 50 percent of their US employees on H-1B and L-1 visas would have to pay the new fee when the next visa application session kicks off on April 1, 2016
• This year Congressional approved quota of 65,000 H-1B visas was filled up in the first few days of the start of the application process on April 1. In fact, the US government had to resort to a computerized draw of lots as it received several times the quota of 65,000.