The Indian IT sector is facing increasing headwinds in the United States, stemming from policy changes and growing protectionist sentiment. While the proposed hike in H-1B visa fees has garnered significant attention, it is not the only cause for worry.
H-1B Visa Fee Hike and its Implications
President Trump's move to increase the H-1B visa fee to $100,000 has triggered concerns among Indian tech professionals and students in the U.S.. The fee hike, presented as a measure to protect American jobs, could potentially stifle innovation in the U.S. and boost India's tech sector as skilled talent returns home. Many Indian H-1B holders are now considering alternative destinations such as Canada, the UK, and Germany.
The increased visa fees are expected to have a minimal impact on the operating margins of major Indian IT companies. However, these companies may pass on a significant portion of the increased costs to their clients. Despite the challenges, experts believe long-term opportunities exist due to the India-U.S. trade deal and optimism about a U.S. Federal Reserve rate cut.
Mounting Hostility and Protectionist Measures
Besides the visa fee hike, there's a growing sense of hostility towards offshoring and a push to prioritize American workers. U.S. Senator Moreno, for instance, is planning to introduce bills aimed at bringing changes to the H-1B program and prioritizing American workers. Earlier in September 2025, Moreno proposed the HIRE legislation, which seeks to make outsourcing more expensive and reduce reliance on foreign labor. Such measures, even if they don't become law, contribute to the uncertainty surrounding the prospects of Indian IT companies in the U.S..
Impact on Indian IT Companies
The changing regulatory landscape and the rise of automation and AI present a "double whammy" for Indian tech firms. Investors are showing anxiety, with the country's 10 largest IT services companies having shed nearly 8% of their combined market capitalization last week.
Indian IT firms are already adapting to the changing environment by reducing their dependence on H-1B visas, increasing local hiring in the U.S., and expanding their offshore offices. H-1B visas issued to leading Indian companies have fallen from 14,792 in 2015 to 10,162 in 2024. Many Indian firms have invested close to $1 billion in upskilling local workers in the U.S., signaling a shift towards a more diversified workforce model.
Potential Benefits for India
Some experts suggest that stricter U.S. visa regulations could benefit India. Professionals returning to India after unsuccessful H-1B applications could contribute to the development of technological hubs like Bengaluru. The returnees would bring capital, networks, and know-how of scaling companies globally.
Challenges and the Path Forward
The Indian IT sector is grappling with slowing growth, tightening margins, and a shift towards automation. They also face the prospect of rising on-shore costs as American clients push for local hiring.
To navigate these challenges, industry leaders need to accelerate U.S. hiring and training, while also lobbying for a predictable and stable mobility framework. The coming months will be crucial in determining whether Indian IT firms can turn the temporary breathing space offered by the 2026 deadline for the H-1B fee hike into a lasting hedge against an increasingly protectionist American labor market. Only the most innovative tech outsourcing firms will be able to capitalize on the opportunity.
