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US government's H-1B suspension to cost Rs 1,200 crore to Indian IT firms: Crisil
Jul-07-2020

Domestic rating agency Crisil in its latest report has said that the US government's decision to suspend issuance of new H1-B and L1 visas till December 2020, will cost domestic information technology (IT) firms just Rs 1,200 crore and have a marginal 0.25-0.30 percent impact on their profitability. It noted that an increase in local hiring over the last few years since the US-the largest market for Indian IT firms started curbing the visa issuances will help limit the impact on the Indian IT companies now.

It can be noted that last month, the visas used by Indian tech professionals to work out of the US were suspended by the Donald Trump administration as it looked to arrest the rising unemployment. The rating agency, however, said that the marginal impact will be over and above the up to 2.50 percent decline in IT firms' profits because of the COVID19 pandemic. It noted that operating profitability is seen at 23 percent in FY21 as per an analysis of 15 top firms' performance. It said the US move on the H1B and L1 visas will have limited impact because of the lower reliance on the entry system by hiring locally, and added that renewals of the visas will be unaffected.

According to the report, new H1B visa issuances contribute less than 5 percent of the US onshore workforce of the top 5 listed Indian IT firms, which account for 60 percent of the industry revenue. On the other hand, it said the share of local hires in their US onshore employee mix has steadily increased from 3035 percent in fiscal 2017 to about 5560 percent in fiscal 2020. It added that with IT firms aiming to increase the share of local talent, especially with digital skills, the transition impact is expected to be marginal for them.

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