The Sep.19 presidential order imposing a fee of USD 100,000 per H1B visa entry stands as one more assault on an edifice that on the surface looked rock solid only a year ago. The order hits India hard even if that is not its intention, and will deliver shock, pain and a host of challenges that cannot hide behind empty bravado. The magnitude of the disruption, its potential to derail one of India’s largest employers, the vast IT services sector, and its likely impact on the wider economy give cause for worry.

A 2019 study, the latest available, by the US Citizenship and Immigration Services put the number of H1B visa holders at 583,420 (“total H1B authorised-to-work population”) as of Sep. 30, 2019. Broadly, it has been estimated that the total H1B population with family and dependents in the US now is over one million. With an estimated three-quarters as Indians, this gives the magnitude of the problem and the India-centric nature of the disruption. The late clarification that the fees will affect only new visas (85,000 are added every year) and that existing H1Bs will not be impacted has calmed some nerves but the climate of uncertainty remains, given the ambiguity written into the proclamation. 

India’s Ministry of External Affairs has correctly pointed out that the action will lead to “humanitarian consequences” for the workers and their families. Even if existing workers are not impacted, their future remains in doubt as their H1Bs, issued for three years at a time,  come up for renewal. Sudden announcements like these mar trust and will force a withdrawal of workers over time, with complex and unforeseen consequences.

Heartburn Was Growing

The heartburn in the US on the H1B among both Republicans and Democrats has been growing, a reflection of the concern that the programme is being used to replace American workers with foreign-born workers to cut labour costs rather than to attract talent where required, as was the professed intention of the quota. Consider that in 2023, under President Joe Biden, Republican and Democratic senators introduced bipartisan legislation to reform the H1B. Their goal: “to protect workers and stop outsourcing of American jobs.”  The resentment is well captured in the presidential order that imposed the hefty back-breaking fee: “To take advantage of artificially low labor costs incentivized by the program, companies close their IT divisions, fire their American staff, and outsource IT jobs to lower-paid foreign workers … Further, the abuse of the H-1B visa programme has made it even more challenging for college graduates trying to find IT jobs, allowing employers to hire foreign workers at a significant discount to American workers.”

While India will suffer, the problem has largely been caused more recently by large US corporations working the visa to their advantage to cut costs. Indian companies in the US have in recent years reduced dependence on the H1B and have instead shifted to hiring US workers, and so the H1B is less of a challenge though the changing climate will impact the entire sector negatively. 

In the 2010 to 2025 period, Indian IT companies topped the list with the highest number of H1B workers (“beneficiaries approved” for the given years) in the US – TCS, Cognizant, Infosys, Wipro. But just one Indian company (TCS) is in the top 10 list by number of H1B visas approved in the first half of 2025, according to the US data hub on H1Bs. All others are US-based giants – Amazon, Microsoft, Meta, Apple, Google, J P Morgan Chase, Wal-Mart, Deloitte Consulting.

This tells us that the problem was coming, that the Indian firms have responded in some measure, but the forces unleashed in the process have taken on a life of their own and will now exact a price. The tinderbox of growing anti-immigrant sentiment, the extreme nature of MAGA politics and bitter political wars along with mounting pressure on jobs for Americans combined together make H1B a sitting duck.

Running Body Shops

The Indian software and IT services giants have for long been accused of running body shops, a business fashioned out of what essentially is labour arbitrage turned into a fine art. The sector has consistently denied this, arguing that they have moved up the value chain and that they compete on quality, not price. There is some truth in both statements.

But there is no denying that almost three decades of growing business (if the Y2K is taken as the beginning of the boom; the sector goes back five decades if traced back to the incorporation of TCS in 1968) has brought little innovation so that the Indian focus at its core is on providing services and handling accounts rather than leading innovation. India’s IT services sector is notorious for pushing the hard grind. The generally exploitative nature of the work, the tightly controlled employee cost that, in some cases, has kept salaries unchanged over the years for freshers despite inflation, and a culture of stretch in the long haul produces zombies who can do no more than work at the lower end of the value chain. 

While the youth have spent their best years in this IT cage, many with the hope that they would move to the US, the few at the top have made money and acquired power. The outpouring of anger at outrageous remarks by a sector leader asking for 70 hour work weeks must be seen in this context.

India and Indian companies have been happy taking the low hanging fruit. The H1B was an opportunity, but it became a trap. It was a distraction from the work required to build new products and services that are the future of business. All together India and the sector are nowhere in breakthrough work. We have served others well. Now they appear not to want us, and we may not know where to go. Meanwhile, the AI revolution takes the world by storm. These are some big worries as India negotiates the H1B upheaval.

(The writer is a journalist and faculty member at SPJIMR, Mumbai. Views expressed are personal. By special arrangement with The Billion Press)