Bloomberg on September 21 published a commentary titled "Modi Will Pay the Price for H-1B Visa Restrictions," pointing out that the latest restrictions on H-1B visas by the Trump administration are simultaneously impacting India's service and goods exports to the U.S., putting pressure on the Modi government at both blue-collar and white-collar ends. In the short term, it may disrupt families and businesses, while in the long term, it could force India's outsourcing and technology industries to adjust their strategies. The author of this article, Andy Mukherjee, is a columnist for Bloomberg Opinion.
The H-1B visa is the main technical work visa in the U.S., mainly issued to foreign employees working for U.S. companies. On September 19, Trump signed an executive order raising the H-1B visa fees from $1,000 to $5,000 per year to $100,000 per year, effective at midnight on September 21. Additionally, some H-1B employees on overseas trips or vacations were required by their employers to return to the U.S. before midnight on September 21, otherwise they might be indefinitely stranded.
In the short term, the new H-1B visa regulations will have a significant impact. On one hand, Indians account for more than 70% of all H-1B visas, and this move will hit India's talent and outsourcing industry hard. The cost of $100,000 will significantly increase the threshold for companies to hire staff, forcing Indian outsourcing giants like Infosys to re-evaluate their "on-site deployment in the U.S. + low-cost delivery" business model. Furthermore, due to increased uncertainty in immigration pathways, some employees may consider moving to internal positions or choosing to relocate. India's domestic market, Canada, Australia, and Singapore have become alternative destinations.
On the other hand, the restriction on white-collar talent in the U.S., combined with previous tariffs on Indian goods, has continued to tighten India's macroeconomic and trade environment. Previously, Trump imposed a 25% tariff on Indian exports due to India's purchase of Russian oil, causing a significant decline in the competitiveness of labor-intensive industries such as textiles, gems, jewelry, and shrimp farming in India. Although the Modi government has tried to alleviate the impact by reducing domestic tax rates, it is currently the holiday season, which weakens the effectiveness of India's mitigation strategy.
Looking longer-term, the impact will be even more profound. Over the past 25 years, the U.S.-India relationship has driven the development of India's software outsourcing and service industries, similar to how U.S. companies helped China's manufacturing sector. However, generative artificial intelligence is reducing the demand for entry-level jobs, and the U.S. Congress is still considering imposing a 25% tax on service payments made to foreign employees, further threatening India's growth model.
More importantly, Trump's measures not only compress the profits of Indian outsourcing companies but also potentially shake the employment expectations of India's youth. In the context of high youth unemployment rates across South Asian countries, this move significantly affects the stability of India and its surrounding regions. Although Modi emphasized in a television address that lowering the goods and services tax would stimulate economic growth, consumer confidence is unlikely to recover under the pressure on both blue-collar and white-collar incomes.
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