What impact a Trump presidency could have on India’s IT services players

The US president has significant executive powers over immigration, meaning the outcome of the US presidential election will have ramifications for the future of employment-based immigration.

while The presidency of Donald Trump received negative headlines, its effect on Indian IT services companies is expected to be limited.

Instead, a Kamala Harris presidency would likely maintain the status quo, according to brokerage JM Financial.

In his first term, Trump — who is now seeking a second term — increased restrictions on H-1B visas. Denial rates for H-1B/L-1 visas increased substantially during Trump’s tenure, and the impact on domestic IT services players was amplified due to their greater reliance on these visas at the time.

However, the ratio of visa-dependent resources to local resources has probably changed now.

According to JM Financial, two-thirds of the US resources of IT services players were on H-1B/L-1 visas in FY17. This is reflected in a 50-80% drop in approved H-1B visas for Infosys, TCS and Wipro during FY15-24.

The brokerage estimates that 65% of Infosys’ US employees were on H-1B/L-1 visas in FY17. This fell below 50% in FY20 and is likely to have been on a downward trend. Similarly, Wipro reported that 69% of its global workforce is localized in FY20.

The 50-80% reduction in H-1B visa approvals for Infosys, TCS and Wipro over the past 10 years also reflects less reliance on visas.

“This largely insulates players from any increase in denial rates should Trump return to office,” it said.

In addition, Trump’s re-election could lead to increased wage obligations for H-1B visas. His administration previously attempted this through the Department of Labor’s Interim Final Rule in late 2020, which was ultimately struck down in court.

“Our analysis of select software roles indicates that average wages for H-1B resourcers today are approximately 25% above prevailing wages. Claims of H-1B workers displacing US workers due to lower wages are therefore difficult to establish,” the document said.

JM Financial also said that Trump’s expansionary fiscal policy – cutting the corporate tax rate to 15% from 21% for domestic manufacturing – could still be positive for domestic demand for IT services as it eases budget pressures.

During Trump’s first term, IT stocks posted solid gains, with Tata Consultancy Services (TCS) up 185%, followed by Infosys up 174% and Wipro up 140%. In contrast, during Biden’s tenure, TCS grew by 22%, Infosys by 33% and Wipro by 26%.

On Tuesday, shares of TCS, Infosys and Wipro Ltd. were trading sideways ahead of the 2024 US presidential election.