Time to act
The new dispensation in United States led by Donald Trump is posing a new challenge to Indian Information Technology sector through a slew of protectionist restrictions.
The new dispensation in United States led by Donald Trump is posing a new challenge to Indian Information Technology sector through a slew of protectionist restrictions. Though the acts of the new regime are purportedly for protecting jobs for locals, the measures would hard hit the Indian IT sector. Indian IT sector's vulnerability stems from its disproportionate reliance on American market for its software exports.
However, the talks of imposing such restrictions detrimental to Indian I T companies are not new. The Indian companies have to speed up the revisiting of their business models to suit the new protectionist environment. Experts suggest that the companies should learn to operate with a lower number of H-1B visas. Indian IT majors like TCS, Infosys and Wipro are trying to revise their business models.
The argument of Trump and his supporters is that Indian IT professionals meeting the US customers at the client sites are displacing local workers with cheap foreign labour. But, the protectionists should understand that free trade cannot be an one way street. The American capital, goods and services are freely flowing into Indian market. Indian government should initiate a diplomatic offensive to convince the US administration.
However, the Indian IT companies cannot wait till then. They have to chalk out their strategy to face the challenge. The Indian IT firms should diversify their export markets. They should find technological solutions to reach out to US customers by offsetting visa restrictions. The domestic IT consumption needs to be stepped up.
Meanwhile, the US policy in this regard is still volatile. Even Trump earlier clarified that the new regime is for merit based immigration system. The IT sector sends only highly skilled man power. In fact, the US companies greatly benefit by the cheap Indian IT services. Trump regime is bound to witness pressure from the domestic corporates too.
Meanwhile, the risks to Indian IT sector due to these restrictions include an increase in cost per professional, more local hiring, and disruption in service continuity which may have negative impact on the profitability of companies that rely more on such visas.
The National Association of Software and Services Companies (NASSCOM), the Indian IT industry body, argues that the bills aimed at imposing visa restrictions have loopholes that will nullify the objectives of saving American jobs. NASSCOM further argues that Indian IT sector is net creator of local jobs in the US.
The IT companies are not just the only sector that interacts with American market though its dependence is relatively high. Despite Trump's threats, India is yet to come up with a coherent strategy to face the challenge. The government and the industrial bodies should jointly hammer out a coordinated response.
The issue cannot be left to the individual companies. The new measures by the US do not just impact IT companies, its deleterious effects on overall economy cannot be underestimated. It's time for India to act.