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Layoffs Shows that IT Sector is Under Visa Curbs, Rising Rupee: ASSOCHAM

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NEW DELHI: India’s leading industry body, ASSOCHAM released a paper which has cautioned that nearly 86% of the H-1B visas issued for workers in the computer space go to Indians and this figure is now sure to be scaled down to about 60 % or even less.
Remittances from US would decline hurting the balance of payment. World bank data showed the U.S was the second largest source of remittance for India in 2015, behind Saudi Arabia, and about $10.96 billion-nearly 16 percent of the total inflows were sent to India. ASSOCHAM expects it to disturb the balance by 8-10%.

Rupee-Dollar Fluctuation

As the cost pressure would increase, aggravated by rising rupee leading to lower realizations, the Indian IT firms may be forced to displace work force. “In that case, the chances of layoffs are real,” the ASSOCHAM Secretary General Mr D S Rawat cautioned, while impressing upon the IT industry apex bodies and the government to work out a joint strategy to deal with the unfolding situation.  In the last three months, the Indian currency has gained by at least five per cent against US dollar, reducing net realizations for software exporters, among other export –oriented sectors.

“After all, our stakes are quite high. It is a question of USD 100 billion software export industry that employs over four million people and reservations for H1B visa for start-ups with less than 50 employee will decrease the number of visa available for Indian firms.

According to the ASSOCHAM paper, the reverses resulting from the tightening of the H1B visas would force IT giants to create fundamental changes in their strategies in terms of hiring, salaries, jobs, impacting employees in India too.

Impact on Indian Industry

The move would also have an adverse macro impact for the Indian external sector economy. Remittances from US would decline hurting the balance of payment. World Bank data showed the U.S. was the second largest source of remittance for India in 2015 with USD 11 billion – nearly 16 percent of the total inflows. “We expect disturbances in remittances by 8-10%”, the paper said, adding there would be fewer opportunities for individuals to work on offshore location.

With the UK already hiking the minimum wage requirement to £35,000 for tier-2 visa immigrants, this latest move by the US will act as a definitive dampener to the Indian outsourcing industry.

The alternate solutions for the Indian outsourcing industry are:  investing in “near shore centres” – facilities close to the US, focus on local hiring in America and to work virtually, which is becoming easier with the wider adoption of cloud services and greater digitization.

SMEStreet Desk

SMEStreet is fast growing platform dedicated to entrepreneurs from small and medium sized businesses (SMEs). Committed to facilitate Knowledge & Networking for Business Growth, SMEStreet offers value added content which shows the actual voice of Indian MSMEs.

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