India’s tech industry is scrambling for ways forward after President Donald Trump dealt it a massive jolt by hiking the price of H-1B visas to a staggering $100,000.
The timing could not be worse for the world’s largest outsourcing market, which is already grappling with slower hiring due to the rise of artificial intelligence automating many entry-level tasks. At the same time, major US tech firms have been laying off staff, a trend that has hit both American and H-1B workers.
“So there’s a double-whammy. AI was already coming. Now there is this H-1B issue,” says Pareekh Jain, CEO and Lead Analyst, EIIRTrend.
The sudden executive order, issued late Friday, sparked a huge panic among Indian IT professionals and their employers. Thousands of H-1B visa holders rushed to catch the first available flight back to the United States, fearing they would be barred from re-entering if they did not arrive before the deadline of 12am on September 21. An Emirates flight bound for India was delayed for three hours as H-1B visa holders got off the plane, worried they would not be readmitted to the US after the new rules took effect.
On Saturday, however, White House press secretary Karoline Leavitt clarified that the new rules would not apply to existing H-1B visa holders or renewals, only to fresh applications, and that it would be a “one-time” fee that will go into effect in the next H-1B lottery round. That reassurance calmed fears among companies that ongoing projects would not be disrupted overnight.
In the initial confusion, several multinational companies instructed employees to return to the US before the September 21 deadline. On one Air India flight to San Francisco, 120 H-1B visa holders became visibly upset because their plane was scheduled to land just 30 minutes before midnight Eastern Standard Time. Many worried that even a short delay could prevent them from clearing immigration before the rules took effect.
The shockwaves quickly spread to the financial markets. Shares of leading Indian tech firms slumped on Friday evening, with Infosys falling 3.4 per cent and Cognizant sliding 4.7 per cent. Analysts said investor sentiment reflected concerns that higher visa costs could erode the competitiveness of Indian outsourcing firms, which have long relied on access to the U.S. market.
The staggering fee hike “severely impacts both Indian and US-listed IT companies with significant US operations,” said Seema Srivastava, Senior Research Analyst at SMC Global Securities. TCS, Infosys, Wipro, HCL Technologies, and Cognizant “depend on the H-1B programto provide skilled engineers for American client projects, so this fee hike dramatically raises costs and diminishes their competitiveness,” Srivastava added.
This represents a “quite significant hit” to margins, in the order of 6 per cent to 7 per cent, said Sandip Agarwal, Fund Manager at Sowilo Investment Managers. In practical terms, this means that for every $100 a company earns in profit, it could now lose $6-$7 due to the higher visa costs, enough to squeeze earnings noticeably and put pressure on budgets for hiring, projects and expansion.
The H-1B numbers underscore why the industry is rattled. The visa programme is the main route for foreign professionals to work in the US in “specialty occupations” such as software engineering and data science. The programme is capped at 70,000 new visas a year, awarded via a lottery. About 70 per cent of those visas typically go to Indians, with Chinese workers accounting for another 11 per cent. For India’s $245-billion outsourcing industry, the visa is a lifeline, allowing firms to station key staff onsite with US clients while the bulk of the team works from India.
The fee increase represents a massive jump. “Previously, the total fee was $215, plus another $750,” said Bikram Chabhal, President of the Association of Visa and IELTS.
This dependence on H-1B visas translates into a clear operational pattern. On any typical infotech project, around 20 per cent of staff are based in the US and 80 per cent operate from India. For major players, the dependence on the American market is even starker: Infosys derives nearly 60 per cent of its revenue from US clients, Tata Consultancy Services (TCS) around 51 per cent, while smaller firms often rely on America for virtually all their business.
Contrary to the perception that Indian firms dominate the H-1B system, it is American-owned companies that hire the largest number of workers on the program. Amazon, for instance, sponsored 10,044 workers in the financial year 2025. Similarly, Microsoft hired 5,189 techies for its US operations and Meta 5,123. Among Indian firms, TCS hired 5,055 workers and Cognizant 2,493, making them the only Indian companies in the top 10.
Indian companies have been trying to boost their local hiring in the US. To that end, they’ve brought in subcontractors to headhunt qualified graduates and recent international students, many of whom will also require H-1B visas to remain employed after graduation.
Despite the uproar, H-1Bs account for only 3 to 4 per cent of Indian IT workers in the US, according to industry data. A majority, between 50 and 60 per cent, already have permanent residency or citizenship. However, the Green Card backlog for Indian nationals can stretch decades, leaving many mid-career professionals in limbo.
The fee hike underscores Trump’s protectionist agenda, which has already reshaped US trade and immigration policy. His administration argues that raising the cost of hiring foreign workers will push companies to recruit Americans, a stance popular with parts of his voter base. US.
Commerce Secretary Howard Lutnick, thought to be the main mover behind the huge price hike on H-1B visas, claims that Indian H-1B workers are often paid around $60,000, far below the salaries commanded by Americans in similar roles.
India’s National Association of Software and Service Companies (Nasscom), the industry’s apex body, strongly disputes this contention. “The average annual salary for an H-1B visa holder in computer-related occupations in 2023 was $132,000, and the median salary was $122,000, according to USCIS (US Citizenship and Immigration Services) statistics.” Nasscom insists US law already requires employers to pay prevailing wages for specialised roles.
Industry analysts say Indian IT firms may now be forced to rethink their delivery models. “The current model is that you need some people on the client side so that the client doesn’t face too many challenges. Possibly in future it may be possible to change this model but that may take time,” says EIIRTrend’s Jain.
One alternative could be near-shoring—setting up teams in Mexico, Canada, or even Argentina, where time zones are the same or only slightly different.
Many foreign firms are expanding Global Capability Centres (GCCs), which act as offshore hubs. However, this approach carries its own risks. A pending U.S. bill, the HIRE Act, proposes a 25 per cent tax on all work outsourced abroad, a move that, if passed, would also target GCCs. For now, most observers believe the bill faces an uphill battle in Congress.
Nasscom points out that, “Layoffs by Big Tech companies in the US have equally impacted H-1B workers and American workers,” reinforcing that Indian firms are not alone in facing challenges from the broader US tech slowdown.
For India, the issue is more than economic – it’s also diplomatic. Successive Indian governments have lobbied Washington to preserve H-1B access, arguing that the programme is mutually beneficial: US firms gain skilled workers, while India builds deeper trade ties. The issue is likely to come up in the ongoing trade negotiations, already badly strained by Trump’s imposition of 50 per cent tariffs on Indian imports.
As the dust settles, India’s $283-billion tech sector faces hard choices. It can seek new markets beyond the US, a strategy with limited past success, or re-engineer delivery models to rely less on expensive US visas. Either way, the new rules may trigger sweeping, and possibly painful, changes in the way the industry operates.