Trump’s H-1B shocker: Can Indian IT sector weather the storm? | Capital Beat

The Federal’s Capital Beat featured Meera Shankar, former Indian ambassador to the US, and The Federal's Editor-in-Chief S Srinivasan in a focused discussion on the US administration’s executive order that mandates a $100,000 fee on every new H-1B petition and its possible link to ongoing India–US trade negotiations. The episode examined the immediate disruption for workers and firms, and how both countries may recalibrate.

Order, intent, and context

Meera Shankar framed the move within US domestic politics, stating, “It is intended in terms of [the President’s] domestic priorities where he has made anti-immigration—both illegal and legal—one of his key platforms.” She added that the decision “serves a double purpose because it increases the pressure on India as we are negotiating.”

Detailing the program architecture, she noted prior US commitments, saying, “The visa fee hike to $100,000 effectively guts the program and it is contrary to the US’s commitments in the WTO General Agreement on Trade in Services… the US had committed to 65,000 persons in Mode 4, and later added 25,000 H-1B visas for post-graduate students.” She also underlined that “the biggest users of the H-1B program were the American companies.”

Shankar pointed to earlier tightening, recalling that “during the first term… [the administration] had made the processing of H-1B visas quite difficult and arbitrary,” prompting firms to hedge with more local US hiring and delivery centres in Mexico or Europe.

Business models under strain

Shankar said Indian IT will need to adapt further, observing, “It really means that the program is at an end… Indian companies will have to look at doing more work offshore and in India.” She noted that technology now enables remote collaboration, adding, “Remotely understanding a client’s needs and remotely installing may now get more precedence.”

On the comparative impact, she emphasised that US competitiveness could also be hit: “America has a shortage of talent… Accenture, Google, Meta, Amazon and Microsoft have been using the H-1B program, and it’s going to hit their ability to be competitive.” She also pointed to cultural factors in US STEM pipelines, remarking, “There’s a huge skills shortfall… in America, it is not considered cool to be a nerd… the cool guys are the ones who play football.”

Summarising the immediate outlook, Shankar said both sides face disruption: “I would say that it would hit both… India faces a challenge because our delivery model has been based on H-1B, but there may be short-term pain and longer-term gain.”

Clarifications, but uncertainty remains

Addressing clarifications that followed the order, Srinivasan said they eased some fears, noting, “This will lower anxiety of those who already have H-1B visas because this clarification helps a lot of them.” He, however, stressed, “The uncertainty hasn’t gone… students and professionals who do not have green cards are worried.”

He contrasted talent pipelines, stating, “In India, the brightest students are encouraged into science or maths… the best of those go to IITs and many go abroad.” He argued that US firms rely on global talent, saying, “America has been getting good talent from all over the world… many founders behind top tech companies are migrants.” He warned that portraying foreign workers as wage undercutters is misplaced, calling the move “short-sighted, more of political messaging.”

On whether US firms will still pay the new fee, Srinivasan said targeted roles will remain in demand: “Those who are really required—specialists in digitization, chip design, artificial intelligence—America needs to compete with China… Certainly, these people are required there.”

Pushback and negotiation leverage

Shankar said any rethink would depend on corporate pushback, explaining, “If companies find that it’s not economical or they are short of skills, then there would be a pushback… and there could be a relook.” She also viewed the move as a pressure point on India: “They initially thought that India was the most manageable target… pick a vulnerable target and demonstrate an easy win.”

She contrasted actions toward other actors, noting, “No sanctions on China for purchases of Russian oil… no sanctions on the EU… and no additional sanctions on Russia itself.” On India’s posture, she said, “India has shown it is not going to capitulate… if there has to be a deal, it has to be based on some middle ground.” She described New Delhi’s approach as “no confrontation, but no capitulation.”

Shankar added that rhetoric softened even as actions hardened: “Softening rhetoric has been accompanied by hardening action… waiver for the Chabahar port withdrawn… 25% extra tariff on account of purchases of Russian oil… and now this H-1B visa.”

Politics at home and structural gaps

On domestic political reactions, Srinivasan called the Opposition’s messaging “political rhetoric,” and pointed to structural priorities: “Underlying strength of a country is its economy and the ability to produce goods and services which can stand at a global level.” He highlighted R&D and education outlays, asking, “How much do we spend as a percentage of GDP on R&D? Education?”

He cited technology capacity gaps: “Have we managed to make our own automobile engine? Our own Kaveri engine has been there for decades.” On semiconductors, he said, “We are far off… setting up a fab is going to cost a ton.” He argued for “more strategic thinking” and infrastructure to channel talent.

Finding a workable pathway

Looking ahead to talks, Shankar stated, “For India there cannot be a trade deal if the 25% tariffs for purchases are not removed and these H-1B visa fees are not reduced or made practical.” She said pre-negotiation consultations were “constructive,” while urging coordination with tech companies that have market exposure in India.

She noted the role of foreign platforms in domestic payments, saying, “PhonePe, Google Pay, Amazon Pay… are getting a commission on every transaction using our UPI interface. Surely we can get Indian alternatives.” She called for signaling options if solutions are not found: “It’s important to signal… we are examining the possibility—if no solutions are found—of stronger action.”

Will the American dream fade—or shift?

On destination choices, Srinivasan said the US would continue to attract talent: “I don’t think the American dream will get over… the best of the best will continue to go to the United States, though they are looking for other opportunities also.” He highlighted the growth of Global Capability Centres (GCCs), noting, “Most of the work is getting offshore… services sector we have a lot more to offer.”

He cautioned that services issues could arise if talks falter: “So far the talk is only about other sectors; services [are] not yet touched. If the talks fail… issues could become more complicated for India.” Shankar added a data point on bilateral flows: “The US has a trade surplus with us in services… they are not very keen on bringing this on to the table.”

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