Outsourcing Made by India Seen Hit by Immigration Law

Software coder Srinivas Mullapudi came to the U.S. on an H-1B employment visa and says he hopes to send enough money back to India to buy an apartment there. He’s concerned America’s immigration revision will end that dream.

“There’s a real worry among Indian visa holders that our employers won’t be able to afford some of us if Congress has its way,” said the 26-year-old, who’s been paid about $4,800 a month by a Bangalore-based outsourcing company to work for a client in Boston since fall.

In June the U.S. Senate passed an immigration bill that allows more H-1Bs while also increasing their cost and barring some companies from placing holders of the visa with customers. India’s software-export industry relies on an army of such guest workers to service clients in the U.S., its biggest market. The tighter rules could sap as much as $8 billion from India’s already struggling economy, JPMorgan Chase & Co. estimates.

The bill “is fairly detrimental to our business model,” Ashok Vemuri, the head of Americas at Infosys Ltd., India’s second-largest software exporter, said in a July 12 interview. “It’s really action for the creation of jobs” for U.S. workers.

The Bangalore-based company gets about 60 percent of its revenue from the U.S., said Vemuri, typical of the sales profile of the largest Indian outsourcing consultancies. Infosys is trying to alert U.S. clients to the threat the bill poses to the South Asian country’s technology industry, he said.

$87 Billion

India will export as much as $87 billion of information technology services in the year ending March 2014, according to NASSCOM, an industry lobby. Sales are equivalent to about 4.5 percent of India’s $1.8 trillion gross domestic product.

The backbone of that trade is the H-1B, a non-immigrant pass that lets companies in the U.S. temporarily hire workers in specialist fields. The permit lasts for up to three years and the maximum extension is usually 36 months.

U.S.-registered units of Indian companies apply for the visas and then often locate the recipient at a client’s company to support the software.

Indians received more than half the 106,445 first-time H-1Bs issued in the year ending September 2011, according to a U.S. Department of Homeland Security report. The second-biggest recipient was China with 9.5 percent.

The main goals of the Senate bill, the most significant revision of U.S. immigration law in a generation, are to create a path to citizenship for about 11 million undocumented immigrants and direct $46.3 billion toward securing the border with Mexico.

The legislation is now before the House of Representatives, whose leaders have expressed opposition to the Senate measure and say they favor separate, piecemeal bills.

Potential Casualties

Infosys and other Indian outsourcers, such as larger rival Tata Consultancy Services Ltd. in Mumbai, have emerged as potential casualties of clauses that change rules governing H-1B and L-1 visas intended for high-skilled workers.

While the legislation raises the annual H-1B cap to as much as 180,000 from 65,000, it increases visa costs five-fold for some companies to $10,000. It also bans larger employers with 15 percent or more of their U.S. workforce on such permits from sending H-1B staff to client’s sites.

The aim is to balance the U.S. economy’s need to fill genuine skills gaps with protection for U.S. citizens from businesses that may use the guest-worker program to bring in cheaper labor, Neil Ruiz, a senior policy analyst at the Brookings Institution in Washington, said in an interview.

Schumer’s View

“The goal of the H-1B program is to have American companies hire foreigners to fill gaps in their employment needs -- not to simply bring in lower-cost labor from overseas,” Senator Charles Schumer, a New York Democrat who is the bill’s principal sponsor, said in an e-mail. “That’s not what some companies have been doing. They tend to bring in foreign workers who get experience at American firms then take that experience back abroad.”

The ban on client visits may prevent Indian outsourcing firms from interacting with customers on U.S. soil, said Infosys’ Vemuri. The company has said it’s exploring contingency plans, such as providing services from nearby countries or purchasing U.S. businesses with American consultants.

U.S. enterprises including Microsoft Corp. and International Business Machines Corp. could pick up the contracts that Indian software exporters might have to jettison, according to Steven Milunovich, the managing director of UBS Securities LLC’s U.S. research group in New York.

In Atlanta, 30-year-old Narendra Sripal’s Indian employer applied to extend his H-1B in April. He’s anxious to complete the process before any tightening of U.S. laws.

Losing Sleep

“I’m losing sleep over it,” said Sripal, who earns about $5,500 a month. “I’ve seen more people get rejected this year than ever before. No one becomes a software engineer for an outsourcing company because they love coding or consulting. It’s for the status back home -- so my parents can brag about their son and find me a nice wife. Time’s running out I guess.”

Sripal sends at least $1,000 a month to his family in Bangalore and Mullapudi, whose H-1B expires in the fall of 2015, about $650 for his sister’s education in New Delhi. They asked that their Indian employers not be named as they aren’t authorized to speak to the media.

India’s central bank estimated in 2010 that the U.S. and Canada account for about 38 percent of remittances to the country, citing transfers by information technology workers. Remittances overall were $62 billion in the year ended March.

Trade Barriers

The potential effect of the Democratic-led Senate’s rules on such transfers and export earnings would ripple through Asia’s No. 3 economy, stoking losses of $6 billion to $8 billion in the 12 months to March 2015, JPMorgan estimated in a June 24 note.

Indian Finance Minister Palaniappan Chidambaram told members of the House during a trip to the U.S. earlier this month that the possible curbs on knowledge workers amount to non-tariff trade barriers.

Chidambaram is trying to keep capital flowing into India to revive its economy, which grew at the slowest pace in a decade in the year ended March. The country also needs funds to finance a record current-account deficit and to steady the rupee. The currency sank to an all-time low versus the dollar July 8.

Sangeeta Kumar, for one, hopes India convinces U.S. lawmakers to think again. The New Delhi-based 32-year-old analyst at Tata Consultancy Services has set her sights on working in the world’s biggest economy.

“The immigration bill is a major blow to my career aspirations,” she said. “Going to the U.S. doesn’t just mean more money, but also work experience that improves your long-term job prospects.”

Possible Reprieve

For now, India may get a reprieve after the Republican-led House delayed consideration of immigration bills until the fall.

House Republicans’ decision to act in a piecemeal fashion, instead of on one comprehensive bill, points to a drawn-out process, diminishing the chances that President Barack Obama will sign his top domestic priority into law by year’s end.

Current draft House legislation also lacks the clause barring visa-dependent employers from client sites, said Brookings’ Ruiz. The shape and timing of the final law remain unclear, he said.

A clampdown may have a silver lining for India by ensuring skilled workers stay in or return to the country sooner, said Shubhada Rao, chief economist at Yes Bank Ltd. in Mumbai.

“I don’t think it’ll be a challenge for those people to find appropriate work here,” Rao said in an interview.

The issue is whether such employment would be as good, said 25-year-old Soma Krada, an Infosys H-1B employee in Houston.

“If I have to go back once my visa expires or if this law forces my company to bring me back home, my life will instantly change,” she said. “My guess is I’ll find work. But will it be with Infosys? Will I earn the same as what I’m earning now? It’s something we all think about. It’s worrying.”

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