The Game of Wins and Losses: U.S. H-1B Visas Fee Hike and its Impact on Indian I.T. Firms

Last Friday came as a shock to India. In a new fold of scathing attacks by the U.S on India, after the recently imposed tariffs, was the deployment of a $100,000 annual fee on H-1B visas - a move which can easily be taken as a big hit to the business models of India’s IT giants. However, the announcement is not likely to have less impact on the U.S itself as America’s universities and start-ups remain on the other side of the loss. 

Immediately after the announcement, it created havoc when companies warned employees against travelling abroad, and foreign workers, especially Indians, rushed to book return flights. Then, on September 20, the White House announced that the fee would apply only to new applications and would be a one-time charge. 

On September 20, the White House clarified that the fee would apply only to new applications and would be a one-time charge. However, till then, a lot of confusion was already created for not just the companies in both countries, but also for the individuals.

Where does India stand with the new rules? 

Reportedly, India is the largest beneficiary of H-1B visas, which account for 71% of approved applications last year. On the other hand, H-1B workers account for 65% of America’s IT workforce, which is up from 32% in 2003. India's IT sector, valued at $283 billion, earns 57% of its revenue from the United States, and, hence, IT industry body Nasscom is of the view that the visa fee hike could disturb the continuity of businesses for certain onshore projects.

As per the inside estimations, the IT firms with the clients such as Apple, JPMorgan Chase, Walmart, Microsoft, Meta and Alphabet's Google might halt the onshore rotations and focus on offshore delivery, with a preference for human resources only from the U.S.

"The $100,000 H-1B fee is likely to hit India’s IT firms hard, as their on-site/off-shore model depends on rotating engineers to the U.S. for projects - something that may no longer be viable at this cost. Even global tech giants might rethink how many Indian engineers they bring on-site, relying more on offshore centres instead," Arsh Bansal, a Software Engineer working in the U.S, says. 

As someone working in the U.S. on STEM-OPT, Bansal says that it makes his future uncertain too. "Companies may hesitate to invest in sponsoring young engineers like me. It feels like the move is less about protecting jobs and more about pricing out Indian talent, which has always been integral to the U.S. tech ecosystem," he further says. 

Experts believe that this might also make Indian firms pass on the increased visa costs to US clients. According to Pew Research, while India accounts for the majority of the H-1B recipients, only three of the top 10 H-1B employers had ties to India in 2023, which is down from six in 2016. 

"New regulatory changes, prompted by increased costs (sharp increases in visa/application fees), heightened scrutiny, and increased political protectionism, will heighten expenses and uncertainty of operations," Ankit Chadha, the Managing Director at TRC Consulting, says. 

Talking to Local Samosa, Mr. Chadha discusses how it will mean re-evaluating the ongoing supply chain of delivery and the workforce model for TRC Consulting. "The client's dependence on H1-B workers/resourcing will need to be measured against the trade-off of investing strongly in local U.S. hiring/resource development, growing either 'nearshore' or offshore delivery centres, and remote delivery to hedge visa risk. We will also need to accelerate our upskilling in automation, AI, cloud, and cybersecurity to better and more effectively staff critical role deployments that are less reliant on H1B from either the India delivery model or remote locations," he adds. 

Contrary to this, some industry workers have also presented a different opinion. “The new H-1B visa fee has understandably created uncertainty for many professionals, but for the GCC industry, it could encourage more companies to build deeper capabilities out of India. We are already seeing global firms view India not just as a cost destination, but as a hub for innovation and problem-solving. This shift has the potential to create more opportunities across tier-2 and tier-3 cities, while also strengthening India’s role in the global talent ecosystem," Nancy Bhatt, Managing Director of Protiviti Member Firm for India, says.

As part of the ripple effect, however, the decision is likely to also incentivise more skilled Indian workers to look at other countries for international study, which will also have a cascading effect on the American university system.

Reportedly, Indian outsourcing giants like TCS and Infosys have long prepared for this by building local workforces and shifting delivery offshore. But multiple other Indian tech giants are likely to calculate the impact of the new order and plan accordingly.

For instance, looking ahead, Mr. Chadha says that his company will "need to proactively build a fresh out-of-the-box cost-buffer strategy, discovering and engaging a delivery model to the nearby client engagement as well as identifying and developing alternate talent pipeline options to rely less heavily on the H1B, particularly in U.S. operations to the extent required".

"But engaging in partnerships, particularly in the U.S., will also be needed to ensure operational sustainability and continuing competitiveness, during and after the legislative changes," he opines.