India's growing visa problem

For most of the last decade, India's large tech outsourcing firms have had little trouble getting H-1B visas. This is changing.

A research report by CLSA, a brokerage and investment group focused on the Asia-Pacific market, believes visa restrictions are "piling up" in the U.S. and internationally, and "could fundamentally alter the business model" for Indian IT firms. The Wall Street Journal wrote about the CLSA report and posted it.

Visa rejection rates, reported the CLSA, for top Indian IT firms have reached a high of almost 40% from 5% in just 18 months.

Additionally, Congress last year hiked the H-1B visa fee by $2,000 for firms that are dependent on the visa to deliver their services, which raised visa processing fees from $2,320 to $4,545, reported CLSA.

This is all bad news for India's IT firms, which have as many as 90% of their U.S. workers on visas.

But it's getting worse for India's IT sector. A federal grand probe into Infosys use of the B-1 visitor visa, prompted by a lawsuit by an employee, Jay Palmer, is raising the national profile of the visa issue. B-1 visa workers don't pay U.S. taxes and are considered short-term. Palmer's lawsuit alleges that Infosys used B-1 workers for jobs requiring H-1B workers.

There is a willingness among some in Congress to increase restrictions on the offshore outsourcers. U.S. Rep. Zoe Lofgren's (D-CA) visa reform bill will increase wage rates for H-1B workers and also make difficult for offshore outsourcers to keep a worker on an H-1B visa longer than three years. Offshore firms can now count on six years.

There remains the persistent threat from U.S. Sens. Chuck Grassley (R-Iowa) and Dick Durbin (D-Ill) for a rule that prohibits companies from having more than 50% of their workforce on H-1B and L-1 visas.

The CLSA report, which looked at Infosys, Wipro, HCL Tech and TCS, said tighter visa restrictions may force Indian firms "to hire more locals at a pace faster than they are doing right now."

By locals, CLSA means U.S. workers.

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Copyright © 2011 IDG Communications, Inc.

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