Ahead of the US Presidential elections, even as the noise around immigration policies expected to increase, the Indian IT sectors’ dependency on US visas is at a decade low as companies have transformed business models to mitigate risks of visa dependency, according to a report by BNP Paribas.

Going into the 2016 US presidential elections, India IT Services companies’ dependency on US H-1B visas was high, with approvals rising to approximately 4 per cent in 2016 from 2 per cent of their total employee base in 2009. What followed was a stringent implementation of the immigration policy, resulting in a spike in the rejection rate to more than 40 per cent in 2017 from 13 per cent in 2016.

Rejection rate

This disrupted the business models of many Indian IT Services companies. During the Biden regime, average annual rejection rate has fallen to 4.5 per cent, the lowest in the past 15 years. Despite this, dependency on US visas has continued to decline for Indian IT Services companies.

According to BNP Paribas’ monthly sectoral report, the recent fall in the dependency on H-1B visas is attributed to increased hiring in the US by Indian IT companies, with 37,000 US nationals directly hired over 2017-21, according to estimates. It also noted that, Mphasis and Infosys remain the most vulnerable to any further tightening of visa norms, with their H-1B approvals as percentage of total employees at 2.4 per cent and 2.3 per cent, respectively vs 0.3-2.2 per cent for peers.

Offshoring trend

There is also increased offshoring, a trend that Covid-induced lockdowns has further accelerated. The trend of falling visa dependency is being seen across most major IT Services and Engineering, Research & Development (ER&D) companies – both in percentage terms and absolute visa approvals/applications. Over the last decade, there has been a structural fall in the number of unemployed IT professionals in the US and the tech unemployment rate because of a sharp jump in well-paying tech jobs in the US.

Hence, there is limited appetite for insourcing IT services jobs. Moreover, the gap in income of a tech employee in the US and in India is approximately 4 times in dollar terms, making outsourcing to India lucrative, according to the report.