U.S. H-1B visa policy changes pose challenges for Indian IT sector

CHENNAI, INDIA — The Indian IT sector is facing mounting uncertainty as the United States implements significant changes to its H-1B visa program.
Proposals such as doubling the minimum salary threshold from $60,000 to $120,000 and stricter compliance requirements could drastically alter cost structures for major players like Tata Consultancy Services (TCS) and Infosys.
These reforms, aimed at ensuring fairness and reducing reliance on foreign labor, are expected to increase operational costs and impact profitability on U.S. projects.
With 75% of their revenue tied to the North American market, Indian IT firms are particularly vulnerable to these policy shifts. “The ability to navigate these rough waters will define the sector’s future,” said Giri Prakash, Business Editor at The Federal.
Mixed performance of Indian IT giants
Recent quarterly results highlight the challenges faced by Indian IT firms. TCS reported a modest 1.1% quarter-on-quarter revenue growth in constant currency terms but experienced a decline in earnings before profits by 60 basis points. Seasonal factors and weak demand in sectors like life sciences further dampened performance. TCS also reduced its workforce by 5,000 employees during this period.
In contrast, Infosys demonstrated resilience with an 11.5% year-on-year profit growth and nearly 2% sequential revenue growth. Its operating margins stood at 21.3%, prompting an upward revision of its FY2025 revenue guidance to 4.5-5%.
Tech companies pivot to local hiring strategy
Indian IT firms are increasingly adopting localized workforce strategies to mitigate risks associated with H-1B reforms.
Infosys has significantly reduced the proportion of its U.S.-based employees on H-1B visas, focusing instead on nearshore hiring in countries close to the U.S. Similarly, HCLTech reported that 80% of its U.S. workforce now comprises local hires.
These shifts reflect broader industry trends as companies seek to balance operational efficiency with compliance in a changing regulatory environment.
Broader implications for the industry
While reforms aim to modernize the H-1B program and ensure fair labor practices, they also introduce complexities for consulting firms and startups reliant on foreign talent. Stricter rules around job role justifications and increased administrative burdens could deter smaller players from leveraging the program.
Despite these challenges, demand for digital transformation and AI capabilities remains robust, offering growth opportunities for adaptable firms. As Prakash noted, “Global economic uncertainty could test the adaptability of even the biggest players in the IT industry.”
As Indian IT companies navigate these turbulent waters, their ability to innovate and localize operations will be critical in sustaining competitiveness in an evolving global landscape.