Trump’s actions on the H-1B visa are unclear, but they won’t be good for Indian IT firms

One of the main agendas in Donald Trump’s vision statement leading up to the presidential elections was creating and securing jobs for Americans. He also promised to bring back skilled jobs for American workers.

“I will end forever the use of the H-1B as a cheap labour programme, and institute an absolute requirement to hire American workers first for every visa and immigration program. No exceptions,” he said in March.

Limiting the use of H-1B visas is bad news for skilled workers in the US and India’s going to be hit hard. Over the last couple of years, Indians have been the recipients of the highest number of (pdf) of such visas, which allow foreigners to work full-time in the US for at least six years. Although H-1B holders pay taxes in the US, they do not receive benefits like social security.

Demand for the H-1B already far outstrips visa availability. In 2016, there were 236,000 applications for just 65,000 available visas, which means only 27.5% of the applicants could get lucky.

Trump’s policies would deal a blow to US companies that depend on foreign talent. They would also directly impact two of India’s largest talent-export groups: students and workers in the IT industry. India’s IT companies, which generate more than 75% of their revenue from the US, often by sending workers there, would also struggle with such a clampdown on the prized work visas.

But reforms may not be immediate, say experts.

“I don’t think Trump will make changes to the H-1B and L1 visa programmes right away,” said Poorvi Chothani, managing partner at LawQuest, a global immigration law firm headquartered in Mumbai.

“In the future, however, Trump could tweak the H-1B and L1 visa programs in a way that may make it harder for companies including Indian IT firms to engage Indian employees. This would affect the profitability of Indian IT companies,” Chothani, who works with several Indian IT firms on immigration-related issues, added.

Students

For Indian students in the US – 132,888 in 2015 – it’s already tough to stay and work after graduation.

They need to find US employers to sponsor their H-1B visa, but the cost that the employer would incur on this process ranges between $3,000 and $10,000 for each application, depending on the company. An Indian IT company would have to pay $8,000 upwards, including lawyer fees, while the cost for an American startup could go up to $3,000.

When Harini Dedhia started her undergrad at New York University in 2010, her plan was simple: work for a couple of years after graduation, gain experience in the US and return to India to start her own investment firm.

The economics and political science major got an internship at a hedge fund during her third year, which was converted into a full-time job. Her employer also agreed to sponsor her H-1B visa. But she wasn’t picked in the lottery system in 2014. She had to return to India. While her intent was never to “emigrate” to the US, Dedhia, says the work experience would have definitely helped her career.

“An H-1B doesn’t mean you are an immigrant. You don’t get any social security benefits but you do pay the government taxes,” she said. “When I went to college, coming back to India was always a part of my plan but I wanted some experience, which I couldn’t have otherwise got back home.”

Immigration experts say the cap is in fact low, compared to the needs of the US economy. If Trump reduced the number of H-1B visas even further, the situation would be grim.

“There is also consensus that the current cap on the number of H-1Bs is just too paltry for the demands of the US economy. That needs a statutory change, which has been hard to secure, given the controversy surrounding the larger immigration debate,” explained Muzaffar Chisti, director of the Migration Policy Institute at the New York University Law School.

He added that Trump has been supportive of admitting immigrants with high skills in the past compared to those with low skills. “He has a history of employing foreign workers. That would suggest a pro-H-1B policy. But he has also farmed his campaign around protecting US workers, which would mean less reliance on foreign workers,” Chisti said.

IT firms

An affordable workforce has been one of the biggest advantages for software exporters in India. So even as the Indian IT industry gets much of its business from the US, their employee base consists mostly of Indians, who travel to the US on temporary visas like the H-1B. These companies have previously faced criticism for using cheap Indian talent for American clients, and for applying for H-1Bs in large numbers that reduce the chances of smaller firms seeking visas.

In the 2016 cycle, majority of the applications were by top Indian IT firms like Tata Consultancy Services and Infosys or by global firms like IBM which have development centres in the US, Bill Stock, president of the American Immigration Lawyers Association, told the Press Trust of India in April.

Any curb on the number of applications filed by these companies would mean they have to hire local US talent, which is far more expensive compared to Indian workers. While this is good for the US, Indian IT firm profits will come under pressure.

Some hope that Trump’s business background will make him more understanding. “I am sure having been in business, Trump would also listen to lots of business leaders in the country and then if we are seen as very critical to the success of the US industry, both in terms of their domestic revenues and in their export revenues, I am sure they will factor those pieces of information into their decision making,” NR Narayan Murthy, founder of IT firm Infosys said on November 9.

Meanwhile, Trump has also alluded to imposing higher taxes on American companies that outsource jobs. If such a tax is imposed, US companies will think twice before outsourcing, which in turn hurts Indian firms.

This article first appeared on Quartz.