The Trump administration’s call ‘Buy American, Hire American’ will seemingly hit Indian businesses which have a sizeable US exposure. This is being followed up by a Bill to curb the use of H-1B visas. The tool: Jacking up the qualifying annual salary from $60,000 to $130,000.
The hardest hit would be the three biggies—Tata Consultancy Services, Wipro and Infosys; not to forget a number of medium-sized companies which have helped US corporations trim costs by outsourcing their work to Bengaluru, Hyderabad, Pune, Chennai, Delhi and, of late, a number of two and even three-tier cities.
No surprise if over 60 per cent of the $140 billion Indian IT sector comes from the US. Now, with Trump’s entry, doubts are being raised regarding Nasscom’s recent prediction about the Indian IT sector touching $300 billion by 2020.
Sure, the Indian IT margins and growth have been under pressure for the past few years. Consider this: The 10-year average growth was 40 per cent in 2002, 30 per cent in 2008 and 20 per cent in 2014. In the early 1990s, 75 per cent of the work took place on-site; it was only 20 per cent in 2013-14. On-site programmers and engineers are paid anything in the range of $60,000-$90,000.
If the new Bill gets the nod of the US Congress, the cost of sending engineers on-site will become prohibitively costly. The fallout will come as a mixed bag— more cost for the US companies and less margins for their Indian counterparts. The flip side is, India is a big market for US corporations. Apple sells nearly 1 million iPhones every quarter.
Pepsi, Coke, McDonald’s and KFC are big draws just like cars from the General Motors and Ford stable. Similarly, the US will be hard-pressed to find viable alternatives to the likes of Kitex, arguably the world’s third-largest kids wear firm. Kitex sells its products to its US clientele in the 70 cent–$2 dollar range, leveraging on its 10 cents-a-piece labour. Try and match that, Mr Trump!