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Trump's new H-1B order leaves no impact on Indian IT firms

Indian IT services may not have an  additional impact, however experts say clarity on execution of  going contracts if any and long-term cost impact is yet to be ascertained

Rukmini Rao | August 5, 2020 | Updated 00:09 IST
Trump's new H-1B order leaves no impact on Indian IT firms

US President Donald Trump's fresh executive order to review the federal government's contracting and hiring practices in relation to the employment of foreign workers in the US and abroad comes right on the back of June proclamation banning the entry of new immigrant workers to the US. The new Executive Order mandates all US federal agencies to complete an internal assessment and look in to the compliance of putting US workers ahead in employment. The Department of Labour will have to finalise guidelines to prevent employers from moving H-1B workers to displace Americans workforce.

ALSO READ: H-1B visa: Trump signs executive order to restrict hiring of foreign workers

Indian IT industry body NASSCOM in its statement said the "Aligning Federal Contracting and Hiring Practices with the Interests of American Workers" order by the White House seems to have been made on the basis of misperceptions and misinformation. "The Executive Order directs the heads of each federal department and agency to review the use of offshore services as well as temporary foreign labor (H-1Bs, L-1s) in the execution of contracts awarded in financial years 2018 and 2019 and issue a report within 120 days to the Director of the Office of Management and Budget," the statement said. The earlier executive order had already mandated the Department of Homeland Security and the Department Of Labour to ensure H-1B visa workers don't put American workforce at disadvantage. "As the world opens up post the COVID-19 induced lockdowns, it is important for the US to be able to access talent critical to the recovery phase. Measures that restrict access to talent will slow-down the recovery phase of US economy, jobs, innovation and R&D," NASSCOM said.

Immigration experts told Business Today that the order has no additional or immediate impact on the H-1B visa program; with the earlier ban in place what is unclear is what happens to contractors or contracting agencies for executing an ongoing contract. "I find that the Executive Order to have little significance in the practical term because the Congress already prohibits most agencies from using appropriated funds to employ non-citizens in the continental United States. On the other hand the Immigration Nationality Act prohibits unfair immigration-related practices and the discrimination based on national origin or citizenship status," said Niranjan Adhikari, Managing Partner at Adhikari Law PLLC.

ALSO READ: US hikes visa fee, move to hurt Indian IT firms

According to Bloomberg's BGOV200 report US' technology spend grew by $4.4 billion between fiscal 2018 and 2019 and now stands nearly $70 billion. "In fiscal 2019, tech services drove the growth and expanded by $3.3 billion, to $48.2 billion, as agencies continued investing in modernisation efforts to replace legacy systems. Hardware purchases had an $800 million uptick, to $21.4 billion, as agencies updated equipment," says the report. The top 10 IT contractors of US government are General Dynamics Corp, Leidos Holdings Inc, Harris Corp, Perspecta Inc, Booz Allen Hamilton Corp, Raytheon Co, Accenture Plc, Northrop Grumman Corp, CDW Corp and Dell Inc.

For top tier Indian IT firms such as TCS, Infosys and Wipro have already been ramping up local talent in the US over the past 5 years, with TCS having nearly 20,000 and Infosys with 13,000 local hires. Industry observers say that it's still early to assess the entire impact of the visa ban orders. With many companies now looking at offshoring for cost arbitrage and federal contracts not forming a significant part of US revenues, IT firms are in a better place than before to handle such uncertainties.

ALSO READ: US hikes visa fee, move to hurt Indian IT firms

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