The Trump administration is reportedly considering putting a 15 percent country cap on H-1B visas.
In a move that will have far reaching implications for the Indian IT industry, as well as the Indian American community, the United States is reportedly considering capping H-1B visas to Indian nationals at 15 percent.
Reuters reported that Washington has informed New Delhi about the move to cap H-1B visas for countries, including India, to deter the global push for “data localization,” sending Indian officials to scurry for an “urgent response.”
Besides India, other Asian countries including China, Indonesia and Vietnam have long been pitching for data localization to gain better control over the international companies, a move strongly opposed by major US firms.
If implemented, visas granted to citizens of these countries will be capped at 15 percent of all the 85,000 H1B visas issued each year.
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India’s recent decision to enforce credit card company Mastercard to comply with new rules on data localization has been cited as the trigger for the latest US move.
India has remained the largest recipient of these temporary visas. Indian nationals get approximately 70 percent of all H-1B visas, since there is no country-specific limit on the number of work visas granted each year. The new quota will bring down the number of visas received by Indians from about 59,500 to 12,500 annually.
H-1B visas have been the main reason the size of the Indian American community has grown from 0.1 percent of the US population to more than 1 percent since the 1960. In 1980, before the current wave of H-1B visa holders’ influx began, there were only 450,000 people of Indian origin in the United States. Currently, the community is more than 3.5 million strong.
Industry shares suffer
Indian officials have been briefed about the development on Wednesday by the Department of State, according to Reuters.
Shares of Indian IT firms went down in early trade on Thursday. Indian IT major Wipro Ltd fell around 4 percent, while Infosys and TCS fell more than 2 percent each, with the broader Nifty IT index at 1.8 percent fall, its biggest intraday percentage decline in over five weeks, the agency reported.
The new visa cap has the potential to cripple India’s huge $150 billion IT industry, as it may nearly wipe off the benefit of flying Indian software engineers and developers to service clients in the United States.
The US Trade Representative in March this year cited the data localization move as a “key barrier to digital trade” and US firms have termed data storage rules as restraining cross-border data flows affecting human innovation and increasing operational costs.
Secretary of State Michael R. Pampeo, who is on a scheduled visit to India next week, has recently reiterated the US push for free data flow not only to help US companies but also to ensure consumers’ privacy. Addressing the US-India Business Council meeting last week, he said, “We’re trying to take down barriers – financial barriers, non-tariff barriers – and create open markets consistent with the central ideas that we hold dear here in the United States. I think that makes India a perfect partner and a great place for us to figure out how to grow our economies and get win-win solutions for both nations.”
However, the US move to cap H-1B visas is being perceived in India as a follow-up of its Sunday action imposing higher tariffs on some US goods, with potential to further escalate the trade tensions between the two countries.