Limited impact of new H-1B norms, but larger risk looms: Jefferies

The impact of the new H-1B norms imposed by the United States would have a limited impact on the Indian IT companies, but further changes are likely because of the trend towards protectionism, according to a report by Jeffries, the global investment banking firm.

The US recently clarified computer programmers, to be eligible under the H-1B visa norms, must prove that theirs is a speciality occupation, thus tightening the norms for entry of low-skilled workers. Indian companies are the largest beneficiaries of H-1B visas.

Jefferies said though the US memo broadly puts into words what is already in practice, it does underline a higher focus on skilled labor immigration and risk of larger immigration reforms remained.

"While in reality, the memo means little given the scrutiny has already been high in the recent years, in essence it does indicate a higher focus from the US government on skilled labor immigration. Indian IT firms too in recent years have reduced visa applications in the lower experience buckets and, hence, this memo by itself is a not an incremental risk," the report by Jefferies stated.

US Embassies around the world started accepting next year's H1-B visa petitions from April 3. "In the recent years, we have seen that H-1B visa caps (65,000 regular quota plus additional 20,000 for masters degree) have been hit within a couple of weeks; this year on account of lower applications and higher scrutiny this might take longer," the Jefferies report added.

The report said given the recent comments made by companies, it would be safe to assume that applications from larger Indian IT would decline, more significantly in the lower experience buckets.

"While negative on sentiment, Indian IT in the past has adjusted business model to the changing immigration landscape - higher scrutiny, increasing visa costs and recent lawsuits. Given the low unemployment rates in the US, immigration reforms will have to balance protectionism and business need, in our view," Jefferies said.

"This memo does little to increase or decrease the risks. At the same time, the squeezing of talent supply due to protectionism will cause increase in onsite costs. While offsets include more offshoring, automation and a possible pass through of costs through pricing increases, the exact quantification of the sum total impact is difficult at this stage," the report added.