India feels the sting as Trump slaps $100,000 fee on H-1B visas

Shubra Singh’s Saturday night dinner at a bar in Pittsburgh was ruined by the White House.

Her eight Indian friends at the table, all techies on H-1B visas, were glued to their phones as they tried to get more information about U.S President Donald Trump’s latest move to raise fees for H-1B visa applications.

Their families were frantically sending “all kinds of articles on the H-1B situation”, said Singh, an Indian biotech professional on work travel to the U.S., adding that the “anxiety was apparent.”

About 71% and 11.7% of H-1B visa holders in the U.S are Indian and Chinese nationals, respectively. The Trump proclamation to increase H-1B visa fees to $100,000 mires their U.S. employment in uncertainty.

Relations between U.S. and India have been deteriorating for the last few months, as Washington imposed additional tariff on Indian exports in response to New Delhi’s ongoing Russian oil purchases.

Back in India, shares of Indian IT companies declined on Monday after the U.S. announced its work permit visa fee plans to bring new employees into the country.

The move could deal a massive blow to companies — primarily in the technology and finance sectors — that rely heavily on highly skilled immigrants, particularly from India and China.

If the $100,000 visa fee for H-1B visa applications is implemented, “it will increase the cost of doing business for IT services companies and end-clients in the US, impacting margins for IT services companies,” Citi Research said in a note on Sunday.

It added that the margins of Indian IT companies are likely to be impacted, as the cost of doing business in the US “may not be entirely passed to customers”.

Investors reacted to the news by shedding shares of Indian IT outsourcing firms, such as Infosys, Tech Mahindra, Wipro, HCL Technologies and Tata Consultancy Services.

Small and mid-size firms were also losing ground, with Persistent Systems, Coforge, Mphasis, Firstsource Solutions and Cyient shares falling between 1.7% and 4.2% by 6.30 a.m. in London (1.30 a.m. ET).

The stock market moves indicate that investors expect the relative price of hiring workers on H1-B visas to increase meaningfully.

The increased visa fee would imply an average hit on margins of around 100 basis points and a roughly 6% average impact on earnings per share for India’s IT companies, if they continue to “employ new people on H-1B visas”, said Ruchi Mukhija from ICICI Securities in a note out Monday.

Analysts suggest that IT firms are likely to alter their staffing strategies as a result of the new expense, by either sending workers to “near-shore” centers such as Mexico or Canada, substituting H-1 B recruits with U.S. residents or citizens, or offshoring more work to India’s growing “global capability centers.”

“Over the years, we have been steadily reducing our reliance on visas through increased local hiring, acquisitions, and partnerships,” said outsourcer Mphasis in a Monday statement to investors. “We are fully staffed for all existing client requirements and will operate in a business-as-usual mode.”

JPMorgan’s Toshi Jain also predicted that the impact, although modest, will be felt far beyond India’s tech sector. 

The economist said that a decline in the number of new H1-B visa holders will likely lead to a reduction in remittances sent to India.

Jain also sees a decline in Indian students choosing to go to the U.S. in the coming years, as the $100,000 visa fee may work as a new “tax” on finding a job in the U.S. post-education.

Prashanth Prakash, partner at Indian venture capital firm Accel, echoed the view that it will not be easy for Indian going to universities in US and who look for a job there.

He added, that Indian talent no longer heading to the U.S. could benefit the Indian startup ecosystem, which is dominated by tech companies.

“The recent H-1B uncertainty is a reminder that India must create opportunities where world-class talent can thrive without leaving home,” said Apurv Agrawal, co-founder of Indian startup SquadStack.ai.

Correction: This article has been updated to more accurately reflect the Citi Research notes on the impact of the H-1B fee on Indian IT margins.