Thu. Dec 3rd, 2020

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Trump’s new visa rules credit negative for Indian IT industry, may impact margins by up to 5.80%, says report

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H-1B Nonimmigrant Visa

Trump’s new visa rules: Amendments to the H1-B visa rules introduced in its biggest market US will shave-off Indian data technology organizations. Overall revenues by up to 5.80 percent and affect the mid-tier players the most, a report said on Wednesday. The rules stated by the Donald Trump government towards the end of its tenure on October 6th, 2020. Are “credit negative” for the sector and will affect organizations over three years, it included. The over USD 180 billion Indian IT industry relies on the US as its biggest market and sends engineers from India to work at onshore customer locations, bringing about the dependency on the H1-B visas.

“The margin impact on full execution… will be in the range of 2.60-5.80 percent, relying upon the level of onshore H-1B visas,”. Rating organization Icra stated, including by and large organizations have 20-30 percent of employees onshore with 40-50 percent employed utilizing the H-1B visas. Also, the affected changes include amending the meaning of occupations and positions meeting all requirements for H-1B visas. Additionally, increasing minimum wage level, and reducing tenure for on-location third-party employee H-1B visa types from three years to one year, it said.

Trump’s new visa rules

“According to our review of the various conditions without considering the increase in actualizations or other mitigating factors. The gross effect of all the provisions will be in the range of 2.85-6.50 percent,” its Vice President Gaurav Jain said. Larger organizations will better set to bear the effect because of the cushion as they have higher operating margins. Also, stronger balance sheet sizes, yet a couple of medium size organizations may face deterioration in their credit profiles, he included. Changes in wage rules alone will result in a 20-30 percent increase in entry-level wages. It stated, including that the widely preferred general engineering degree may not suffice after the revisions to the rules.

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With such high entry-level wages, the pace of offshoring is required to increase. Indian organizations will attempt to pass on the increased expense of service delivery. Which is now confronting pricing pressure for traditional/legacy services. “This will bring about expanded offshoring as a win-win circumstance for the customers as well as IT services companies,” Jain said.

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