After US President Donald Trump announced a sharp hike in H-1B visa fees, concerns rose in India’s IT sector. Analysts, however, say the immediate impact will be limited as firms have reduced reliance on H-1B visas via localisation and offshoring, though medium-term costs may push firms to adapt their operating models
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After US President Donald Trump announced the significant hike in H-1B visa fees, the Indian IT sector has become a lot more concerned. However, the positive, as per the analysts, is that the impact of the H-1B visa application fee hike is expected to be limited on the Indian IT services firms, as per IANS. Analysts suggest that, given their reduced reliance on H-1B visas over the past decade through increased localisation and offshoring, the impact of the hiked visa fees is not going to impact the major Indian IT firms.
The medium-term implications, on the other hand, could be more pronounced. Reports from the analysts suggest that the elevated cost of delivery in the US may lead to a structurally higher cost base. Therefore, the higher cost of delivery may prompt firms to reassess their operating models and explore mitigation strategies, as per reports.
Considering that the extent of impact could vary depending on a company’s US exposure, onsite workforce mix, and reliance on non-local talent, the situation after Trump’s announcement of a visa fee hike still remains a point of concern.
Historically, visa-related challenges have stemmed more from executive actions than legislative changes, with cost pressures already rising in earlier phases of visa tightening. Importantly, supply-side disruptions tend to be more damaging in high-growth environments – conditions that are not currently in play.
The report further highlighted, “As H-1B lotteries and petitions typically occur in Q4–Q1, the earliest material impact is likely to be reflected in FY27 petition cycles. In response, providers are expected to accelerate offshoring, expand nearshore operations in Canada and Mexico, pursue acquisitions in Europe and APAC to diversify geographically, and invest in automation and AI to enhance productivity,” as cited by news agency IANS.
These changes are likely to make Global Capability Centres (GCCs) in India more appealing to professionals, particularly as on-site possibilities shrink and clients want more rate realisation and efficiency gains.
As per IANS, India's equities markets may face some near-term volatility, but overall valuations remain significantly higher than historical averages. However, valuations for the IT sector have corrected in the last 6-12 months due to a weak demand outlook.
The report further stated, “While global risks, such as US tariffs, pose short-term challenges for export-driven sectors, India’s macroeconomic fundamentals continue to be resilient,” as cited by IANS.
(With inputs from IANS)
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