Trump Prsidency Impact | Indian IT Under Pressure

In Donald J. trump’s OPENING address after being sworn in as the 45th president of the United States of America on 20 January, he conveyed a clear message to the world — “From this day forward, it’s going to be only America first.” Trump said his government will follow two simple rules: “Buy American and hire American.” While Americans applauded and cheered him on, his speech has rattled the Indian IT industry, which is heavily dependent on America. After all, about 60 per cent of the $82-billion software export revenue of the Indian IT outsourcing industry is contributed by North America.

In fact, Trump’s victory as the upcoming US president on 9 November had immediately sent shockwaves to the Indian IT industry. Analysts and industry observers were almost unanimous that the sector would have to battle a sense of uncertainty, to say the least. “With the US electing a president who has been extremely vocal in his views against outsourcing, and assuming a scenario wherein his electoral promises come to fruition, it is no surprise that there will be an adverse impact on the Indian outsourcing industry as a whole,” research firm Zinnov had said.

Zinnov advised the industry to look for markets elsewhere and make more serious attempts to “enter the next orbit of service delivery, focusing aggressively on value addition through digital transformation, setting up delivery centres in low-cost talent pockets in the US, acquiring US-based technology services and consulting companies and partnering with startup ecosystem to stay relevant in the US technology business.”

The new Trump administration might reform the H1-B and L-1 visa schemes that allow Indian IT companies to send their employees to work temporarily in the US. Currently, the H1-B allows 65,000 temporary workers and 20,000 with advanced degrees in technology-related fields from American universities to work in the US each year.

The US already raised H-1B and L-1 visa costs in January 2016 — from $2,000 to $6,000 for H-1B and $4,500 for L-1 visas — for firms that employ 50 or more workers in the US, with more than 50 per cent of them employed on H-1B or L-1 visas. Now analysts are worried that the eligibility criteria to attain these visas will be made more stringent during Trump’s regime.

During his election campaign, Trump had said that he will hike the minimum wage paid to H-1B visa holders, which may reduce the job opportunities for Indian IT professionals. He also assured that he will impose 35 per cent tax on American firms that lay off local workers and outsource jobs to other countries including India.
While restrictions on the visa policies will be unwanted, analysts believe the industry must gear up to embrace changes. “H1-B potential restrictions are clearly a downside for Indian IT players since that could result in restriction in number of people as well as higher costs given the proposed increase in the minimum salary levels to $100,000 per annum,” says Raja Lahiri, Partner, Grant Thornton India.

“However, the fact is, the industry is also changing significantly in its delivery models with focus on AI, cloud, robotics, etc. Indian IT players are already adopting the new paradigm, but would need to accelerate adaption to the changing landscape as a result of the shift in delivery models as well as proposed changes in US H1B,” adds Lahiri.

Trump’s protectionist views expressed during his election campaign also found place in his latest speech at his swearing-in ceremony. “We have spent trillions and trillions of dollars overseas, while America’s infrastructure has fallen into disrepair and decay. We have made other countries rich, while the wealth, strength and confidence of our country has dissipated over the horizon…But that is the past. And now, we are looking only to the future,” he said while taking the oath of office. He said every decision on trade, taxes, immigration, and foreign affairs will be made to benefit American workers. “We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs…Protection will lead to great prosperity and strength. I will fight for you with every breath in my body,” he said further.

“Trump’s administration’s protectionist views would have a further dampening impact on growth prospects (of the Indian IT industry), if the views were to crystallise into some serious policy implementations,” says Arup Roy, Research Director,Gartner.
Clearly, preparedness rather than panic seems to be the key for the Indian IT industry. Ganesh Ayyar, CEO of Mphasis, says “While I don’t think there will be a lasting impact, I expect some temporary impact… The Indian IT industry is known for its resilience and its ability to change. So, let’s be ready and more agile instead of trying to guess the unknown.”