A globalising world enabled the spectacular rise of India’s information technology industry over the last couple of decades. The IT sector not only pulled up the GDP but also came to symbolise young India’s aspirations.
A globalising world enabled the spectacular rise of India’s information technology industry over the last couple of decades. The IT sector not only pulled up the GDP but also came to symbolise young India’s aspirations. With the world now bending towards protectionism, it faces a challenge to its talent-centric, software export model. In recent weeks, a slew of countries, which are estimated to account for three-fourths of the industry’s revenues, have placed stricter rules on their companies getting talent from overseas.
Whether the challenge of protectionism fades out or deepens over a longer time horizon will depend on the global economic outlook. The visa rule changes for Indian tech personnel weren’t wholly unexpected, especially after Brexit and Donald Trump’s victory in the U.S. on the back of, among other things, promises to put the brakes on outsourcing. Only, now governments are acting upon such rhetoric in some countries, including the U.S., the U.K., Singapore and Australia.
President Trump signed the ‘Buy American, Hire American’ executive order last week, seeking to raise the bar for the award of H-1B visas, an important route for Indian companies, so that they are given to the “most-skilled or highest-paid” beneficiaries.
Earlier this month, the U.K. scrapped a category of short-term visas that have been used extensively by Indian companies to get their IT professionals on-site. The Australian equivalent of this is the recent junking of what are called the ‘457 visa’ rules. Singapore has reportedly kept approvals for work permits on hold for a while now.
It is still too early to gauge the exact impact on IT companies, in part because much depends on their ability to rework their operational models to do less on-site. As it is, it is a challenging time for the industry – with slowing business growth, a strengthening rupee, not to speak of the difficult transition from a traditional model that was based on making money by building custom solutions and undertaking maintenance to one that is cloud-based. Industry lobby Nasscom, which in February quite unprecedentedly put off its annual revenue forecast by a quarter amid uncertainties on the policy front in the U.S., has in recent days sought to counter the impression that it is Indian IT companies that are getting the lion’s share of H-1B visas for Indian nationals.
Those who believe the challenge will blow over take heart from the fact that there is no legislation hurting outsourcing on the immediate horizon and the belief that the developed world cannot really do without India’s IT skills. The government, which has reportedly sought a World Trade Organisation-backed framework to facilitate trade in services in the light of rule-tightening by the developed countries, is naturally concerned. The industry, which employs over 3.5 million people and earns over $100 billion in export revenues, is now navigating a world with walls.
The Hindu, April 29, 2017