H1B visa: Global firms setting up captives in India to tide over changes

Immigrant Americans protest US President Donald Trump's decision to deny visas to their families
Narayanan Kannan is a worried man. The news about the Trump administration bringing in new rules to prevent foreign technology workers on waiting list for Green Card from extending their H1B Visas has troubled him.

An American citizenship has been his dream ever since he went on his first project to the US over a decade ago. Several trips later, an application for a Green Card and a house in Florida, the 35-year-old says he is like “Trishanku”, the mythological character who ends up in limbo — neither living on Earth nor in heaven, but hanging in between the two worlds.

Narayanan (whose name has been changed) is among half a million Indians on extended H1B visas who may have to return to their home country if Trump, who won his Presidency promising protection of local jobs, continues to make good on his promise.

The latest in a series of measures against immigration is the reported plan of the US Department of Homeland Security to prevent foreign workers from extending their H1B visas, according to McClatchy’s DC Bureau, a news publisher. H1B visas are issued for three years that can be extended to another three years. During this time, many applicants try for US citizenship by applying for a Green Card.

The worst affected lot from the proposed overhaul will be Indian IT professionals who constitute the bulk — two thirds — of the H1B visa holders. 

NASSCOM President R Chandrashekhar has called the move an “extreme concern”. “In the name of protecting American jobs, this has been applied only to the so called visa-dependent companies, which translate to Indian companies,” he said.

“There is no doubt we have been seeing an increasingly negative environment and this is a part of the protectionist, anti-globalisation trend.” 

Immigration has been a concern for American lawmakers since recession hit their economy a decade ago.  As US firms looked at survival in an uncertain environment, they shed jobs, outsourced to US and Indian firms, who moved work offshore to low-cost countries such as India. These firms in turn sent engineers from their countries to the US  who often ended up working in roles previously held by locals. 

The wage arbitrage worked until the a bad job environment sparked protests against the immigrant workforce. However, Indian outsourcing firms such as TCS, Infosys, Wipro and HCL Technologies have taken the cue and begun hiring locals. It is reflected in the reduced number of H1B visas they have been seeking in recent years. In 2016, the number of H1B visas secured by the top seven Indian IT firms was 37 per cent less than in the previous year. 

The change is being led, in part, also by the broader technological shifts in the IT sector.  Global clients are moving their technology budgets from traditional outsourcing contracts to newer areas such as Digital, Cloud and Analytics. 

“Unlike in the past where you could code from any place as long as you were given the specifications, today, you need to work hand in hand on projects with customers,”  says an executive of a large IT services firm. “So, you are seeing a lot of Indian firms hiring in the US.” 

However, the reverse is also happening. While Indian firms are hiring in the US, their clients, who have experienced the advantage of outsourcing, are moving  their work centres to India to tide over the immigration restrictions. Instead of outsourcing to Indian firms, they are opening captive centres or expanding existing ones. The planned move to stop extension of H1B visas will only accelerate this trend and herald a second wave of captives in India, say analysts.

“This obviously is a great time for the evolution of the Indian technology industry. There is a global shortage of talent in newer skills and global corporates are coming to India for talent, even as they look at the country as a market,” says Praveen Bhadada, partner (digital transformation practice), at Zinnov, a global technology consultancy. “With the (anti-immigration) noise, setting up a global in-house centre (GIC) is the alternative to meeting the talent shortage.”

The anti-immigration rhetoric in the US could also be a potential opportunity for India to attract talent back home to meet the needs of a growing economy. “If that happens, then I say ‘Swagatam, Welcome Home.’ You’re coming back in time to help India Rise,” wrote Anand Mahindra, chairman of Mahindra group, on microblogging platform Twitter.

The US move last month to restrict H4 visa holders from taking employment has also spooked Indian workers there.  H4 visas are issued to spouses of H1B visa holders who are equally qualified but are forced to waste talent for no fault of theirs. 

“We have got enquiries from people on projects in the US on the options to return because of job restrictions on spouses. If the uncertainty remains, many of them will come back,” said an executive who handles immigration at a US multinational. 

However, immigration analysts say implementing the proposed changes to the visa rule won’t be easy as the US industry will lobby hard to ensure the rhetoric doesn’t become a law. “The administration can bring about this change as a policy decision and bypass the approval process (by the Congress).  However, many employers, including technology companies, have spent huge sums on the Green Card approval process to ensure that they have the best workforce,” said  Poorvi Chothani, founder and managing partner of LawQuest, a Mumbai-headquartered law firm specialising in immigration.

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