Impact of H-1B visa hike to be minimum on Indian IT firms: Report

New Delhi: The impact of the H-1B visa application fee hike to $100,000 is expected to be limited on the Indian IT services firms — given their reduced reliance on H-1B visas over the past decade through increased localisation and offshoring, a report said on Tuesday.

However, the medium-term implications could be more pronounced. The elevated cost of delivery in the US may lead to a structurally higher cost base, prompting firms to reassess their operating models and explore mitigation strategies, said a Franklin Templeton report.

The extent of impact could vary depending on a company’s US exposure, onsite workforce mix, and reliance on non-local talent.

Historically, visa-related challenges have stemmed more from executive actions than legislative changes, with cost pressures already rising in earlier phases of visa tightening. Importantly, supply-side disruptions tend to be more damaging in high-growth environments – conditions that are not currently in play.

“As H-1B lotteries and petitions typically occur in Q4–Q1, the earliest material impact is likely to be reflected in FY27 petition cycles. In response, providers are expected to accelerate offshoring, expand nearshore operations in Canada and Mexico, pursue acquisitions in Europe and APAC to diversify geographically, and invest in automation and AI to enhance productivity,” the report mentioned.

These shifts are likely to make Global Capability Centres (GCCs) in India increasingly attractive to talent, especially as onsite opportunities decline and clients demand better rate realisation and efficiency gains.

India’s equity markets may experience some near-term volatility, but overall valuations remain broadly elevated versus historical averages.

However, valuations for the IT sector have corrected in the last 6-12 months due to weak demand outlook.

The outlook for overall corporate earnings in Indian markets is improving, supported by a recovery in domestic consumption and a gradual pickup in private sector capital expenditure.

“While global risks – such as US tariffs – pose short-term challenges for export-driven sectors, India’s macroeconomic fundamentals continue to be resilient,” said the report.

Looking ahead, the potential conclusion of a trade agreement with the US in the second half of 2025, combined with strengthening domestic demand and improving earnings visibility, could act as positive catalysts for the market over the coming quarters, it added.

—IANS