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IT industry must reorient strategy

Revised H-1 B visa rules pose challenge to Indian firms.

IT industry must reorient strategy
The Trump Administration of the United States (US) is bent upon a hot pursuit of unilateralism on the trade front, refashioning its extant trade laws to "Make America First", ignoring its post-war avowed commitment to bolster multilateralism and rule-based model for the conduct of commercial engagements. Besides showing scant regard for reviving Doha Development Agenda of World Trade Organization, it was able to make WTO conform to its own agenda by getting Trade Facilitation Agreement (TFA) accepted by all members of the WTO sans much ado. In fact, at the very first ministerial meeting of WTO in Singapore way back in 1996, TFA issue was opposed by many members including India which now got ratified by a majority of WTO members with New Delhi too abjectly surrendering.

Undoubtedly, barriers to the export of merchandise goods both tariff and non-tariff, particularly the latter in advanced nations had multiplied despite WTO policing the global trading regime. But the services sector which has of late emerged as a crucial saviour to emerging economies like India in the trade front also risks confronting its murky moments of comeuppance soon. It needs no mention that India's technology and business service industry is the most dynamic in the world as India is home to an abundance of software skill, unmatched in any part of the world being offered and continually honed by its technical educational institutions, some of which rank high in the global arena.

From offering basic information technology (IT) services when it began rather unobtrusively in the 1990s, the Indian tech industry has shaped ahead swiftly to offer functional IT later in the 1990s and enterprise resource planning (ERP) and productivity software in the early 2000s. Besides earning handsome foreign exchange and helping to relocate young and intelligent Indians in the overseas mostly in the United States and in the United Kingdom, IT industry has become a linchpin in the wheels of the domestic economy too as it absorbed skilled personnel by providing employment outlets in the real sectors of the economy.

It was during this period that iconic IT companies such as Tata Consultancy Services (TCS), Infosys, WIPRO, and Satyam took firm roots in overseas markets, etching a name and brand for themselves even in far-flung places like Australia. National Association of Software and Services Companies (NASSCOM) estimates IT and IT-Enabled Services (ITES) industry's contribution relative to India's gross domestic product (GDP) is about 7.7 per cent in fiscal 2016-17. The total IT-ITES industry revenue (excluding hardware) is estimated at 130 billion dollars (Rs 8.40 lakh crore) in 2015-16 including exports of 108 billion dollars (Rs 7 lakh crore). NASSCOM estimates US and Europe together account for about 90 per cent of the total IT-ITES exports for fiscal 2016-17.

The importance of Indian software personnel as service providers by moving and relocating themselves to the location in which their service is sought to be gainfully employed can hardly be gainsaid. But a reality check reveals that when NASSCOM talks about 90 per cent skilled Indian personnel, it mainly speaks about those who have been flocking to the US and a much less extent to the UK, with other European countries not demonstrating any iota of interest to give them permanent residency lest their local population should react otherwise. With nationalism emerging as a battle cry even from multicultural place like Britain which had seen the drama and trauma of its exit (Brexit) from the European Union in a referendum last June, the scope and hope for other insular European countries in taking skilled personnel under the WTO category of Mode 4 of the so-called services negotiations look tenuous. The WTO is itself facing an existential threat as a few puissant members displaying their open disdain for its advocacy of multilateralism.

It is in this context that one needs to take a hard look at the row over H-1B visa currently playing itself out in the US. The H-1B visa programme was purported to permit the US-based companies to get foreign workers temporarily admitted in select high-level positions, mainly in engineering science and IT. The annual cap for such visas is 65,000 approvals as set by the US Congress. Additional 20,000 approvals are reserved for foreign citizens with US Masters or higher degrees. Traditionally the US Citizenship and Immigration Services (USCIS) would monitor the number of petitions received to notify the public when the cap has been met. Here a digression is in order as most of the Indian students who got educated in prestigious IITs, BITS, or engineering colleges straight head for higher studies to the US universities to pursue their Masters only to stay put, secure a green card and citizenship, prompted by the lure of Mammon and love for living far from the madding crowd here which push them willy-nilly.

With the influx of those settling in the US and those constantly seeking to settle their remaining ceaseless, the pressure on IT firms to cater to the clamant demand, regardless of the repercussions this might spawn, also mounts. It is against this backdrop that the US President Donald Trump and members of Congress from both parties have promised to overhaul the visa programmes used by firms to bring overseas workers to the US. A measure of their concern is reflected in the fact that in the current (115th) Congress, as many as four bills pertaining to H-1B and L-1 visa programmes have been introduced by individual congressmen and senators. They include, among others, the "Protect and Grow American Jobs Act" Bill by Congressman Darrell Issa on January 5, 2017, the "High-Skilled Integrity and Fairness Act of 2017" by Congresswoman Zoe Lofgren on Jan 24, the "H1-B and L-1 Visa Reform Act of 2017" by Congressman Pascrell Jr on March 2, besides another Bill "H-1 B and L-1 Visa Reform Act of 2017" by Senators Chuck Grassley and Dick Durban on Jan 20.

A notable move made at the end of last month when USCIS department set forth guidelines making it harder for companies to bring foreign technology workers to the US using H-1 B visa tack. It further announced that it would begin accepting H-1 B visa petitions for the fiscal year 2018 (beginning on October 1) on April 3, rejecting all cap-subject H-1B petitions filed before April 3, 2017. It has also kept in abeyance all premium processing for this visa till the start of the fiscal year on Oct 1. It is against this avalanche of changes abruptly introduced that Indian techies and IT firms need to evolve strategies.

Prof. Ajay Shah of the National Institute of Public Finance Policy (NIPFP) put forth a novel proposal, stating that instead of sending our engineers to the sites, the time has come to make an alternative model of taking the work from the foreign companies and executing it here leveraging the vast talent pool and providing plentiful opportunities to other skilled people to share the bounty. This means the extant body-shopping model needs to be scrapped and the pie of the cake of foreign assignment widely shared with all the necessary skilled personnel here and augmenting their income too. With export opportunities for merchandise goods shrinking due to global economic slowdown and laggard recovery, the opportunity for utilising services exports cannot be lost too by sticking to the so-called rights and claims for our people when none exist in reality.

(The views expressed are strictly personal.)
G Srinivasan

G Srinivasan

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