November 23, 2017

INDIA INFO- TECH COMPANIES and BODY SHOPPING

Trump had stated in his inaugural speech that: “Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.”

This statement put jitters into the Info-tech companies of India who now expect that this change in policy will impact negatively on their business prospects and on their profitability. There is no sympathy for the Indian companies from either the U.S. Administration or the market forces in either India or America; since over the last 25 years Indian companies have not only failed to develop any new software products but have used the H1B visa facility to push into the States low cost Indian workers.

The H1B (foreign worker) Visa is well defined. The H-1B is a non-immigrant visa in the United States under the Immigration and Nationality Act, section 101(a)(17)(H). It allows U.S. employers to temporarily employ foreign workers in specialty occupations. The key words here are “Specialty occupation”. The regulations define a “specialty occupation” as requiring theoretical and practical application of a body of highly specialized knowledge in a field of human endeavor.

Most info–tech companies from Asia and predominantly India glossed over the specialty occupation requirement and flooded the U.S. with entry or low-level programmers at minimum salary; which not only violated the spirit of the H1B visa requirements, but also helped reduce the pay-scales in the local U.S. market.

The future of Indian economy, in-so-far as it is dependent on the U.S for favorable balance-of-trade can no longer count on Info–tech sector or body-shopping trade. Indian industry has to move its focus to consumable market items, replacing China in the small to medium consumer markets of North America. From toasters to BBQ grills, from car accessories to home furnishing; India can fulfill the voracious appetite of the American consumers for almost every consumable product that is needed. The issue at present in the Indian manufacturing sector is that of aggressive pricing structures to suit local American market conditions and the higher standards of quality that are needed to be achieved on a consistent basis.

The growing Indo–US Defense ties should also put Indian capital industry on firmer ground in USA. As the American Defense companies look towards developing advanced technologies for the U.S and NATO troop requirements; the varied technology talent that is abundantly available in India can be their most valuable asset – provided the Americans are willing to invest heavily in training programs and technical education infrastructure. India has the best engineers and technicians with a heavy emphasis on theoretical knowledge, but lacks the foresight and vision to convert theory into saleable practical technologies. If the Americans can leverage this into a long term design and manufacturing strategy, it can be a win-win situation for both nations.

Body shopping is the practice of consultancy firms recruiting workers (generally in information technology sector) in order to contract their services out on tactical short to mid-term basis. IT services companies that practice body shopping assert that they provide real services (such as software development) rather than the “sham” of merely farming out professionals to overseas companies.

The change in policy by Trump destroys this “body shopping” business and with the lack of any alternative in the technical arena, Indian Info-tech companies can look towards a gradual death in the global market place. The Indians keep pitching a rhetoric that “there is a lack of skilled labor in the Info-tech sector in US” and then counter themselves by stating that they will go in for “Local hiring in innovative areas”; needlessly adding to the confusion about the potential H1B Visa policy of the U.S.

Issue of H1B visas

The one major anxiety and concern to Indian businesses; and to a lesser degree to the Indian government is the issue of H1B visas for seeking employment in the US. Beyond this the usual concerns of India will be on bi-lateral trade and regional security. Given the reality that America does need a large amount of talented people in the areas of mathematics, sciences, information technology, et al; we can fully expect President Trump to counter the reduction in H1B Visas with more liberal distribution of student F1 Visas – as he has publicly stated that he will “woo Indian entrepreneurs and students to the U.S.” This will attract global talent to the colleges and Universities in America, along-with fees that the students will pay towards admissions, thus adding to the prosperity of the currently failing university education sector; and those who graduate successfully will become the immediately available local talent pool that the U.S. industry needs.

Regional Security issue

On the issue of Regional Security, Trump has been clear that he respects the professionalism of the Indian Armed forces and acknowledges India as a nuclear power, while labeling Pakistan as “semi–stable and a safe haven for terrorists”.He has gone on to label China as a ‘currency manipulator’ and has promised to impose heavy tariffs on Chinese products and services making their way to America; if China does not agree to re-write the existing Sino–USA Trade Agreements.

Both these issues taken in conjunction point to the continuation of the American ‘Pivot–to–Asia’ policy where India is considered as a crucial U.S ally to counter-balance the Chinese influence in the Asian region as well as ensuring the position of the U.S as India’s primary Counter-Terrorism partner in the Indian continent.

In a nut-shell; Trump is focused on MAGA (Making America Great Again). All his policies and decisions will be a reflection of this one constant effort and the only way that India and its industries can reap financial benefits and international recognition is by tailoring Indian policy; both at Government level as well as at Corporate levels to be in conjunction with Trump’s policies and act as support element rather than as a disruptive policy of opposition to America’s new direction. The world and India has to understand that Donald Trump is an unconventional President who can be considered to be ‘loose cannon’ when faced with the intricacies of global trade and diplomacy issues. If nothing else, Trump is known for his disruptive view-points that raise concerns and hackles on a global scale. He started the ball rolling with his opinion that the ‘One China’ policy needs drastic revision and followed it up by calling NATO “obsolete” and the German immigration policy as a “catastrophic mistake”. Essentially he has made his thought process very clear – POTUS Trump is going to express his views loud and without reservations; and if others don’t like it, they can go fish.

Picture Credit: Business Insider

Author: ‘Sardar’ Sanjay Matkar

Twitter: @sanjaymatkar

www.matkar.net


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