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Of Trump, H1-B Drama, and the Lessons Learned by Indian IT Firms
Tue, 9 May Pre-Open

Things are not going well for Indian IT sector. The sector is the target of anti-immigration and protectionist rhetoric since Mr Trump took charge of the White House.

When the US H1B visa issue came to the fore earlier this year, IT companies traded on a cautious note.

The Trump government wants more local hiring instead of imported cheap labor from foreign countries. As per Trump, H1B visas should only be granted to the most skilled and highest-paid applicants.

Assuming Trump's words turning into actions, what will be the repercussions of the above developments for the Indian IT sector?

Many IT companies will think to reduce their exposure to the US and move to other geographies is a given. However, given the large chunk of revenues they derive from the country, it's unlikely that the companies will substantially bring down their focus on the US. Instead companies may look out for other means to reduce costs or protect margins.

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One way out can be to adjusting to Trump's demands. For this, the outsourcing companies will be applying for fewer US work visas, and bringing outsourced Indian employees back home.

This trend is already visible. As per an article in the Business Standard, the number of H-1B applications fell 16% this year, the first decline in five years.

A more visible example can be drawn from Infosys Ltd. The company is opening a new development center in Indiana in August where it hopes to create some 2,000 jobs for Americans by 2021.

Despite these measures, there's a likelihood that the cost component for the Indian IT companies will go up as an when Trump's decisions get translated into actions.

That said, Indian IT companies will also need to rise to Trump's challenges.

Fortunately, most of these companies were already gearing up for the above developments. Trump may have only accelerated their defense.

So, if you aren't worried about the revenue guidance in the coming quarters due to the Trump policies, you need to do just one thing: stay vigilant on valuations.

You never know, the Trump crash may be an opportunity to act on not just IT but lots of other safe stocks as well.

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