Knowledge Partners

 Basiz Fund Service    Economic Laws Practice    Avalon Consulting  

 Spark Capital    Technloogy Holdings  

May 31, 2003

Caught between a threat to the L-1 and a decline in the H-1

As has been widely reported (including in the New York Times), John L. Mica, a Republican Congressman from Florida, has introduced a bill to prevent US companies from hiring foreigners with L-1 visas.

What makes the L-1 visa so important to Indian companies? For one, there is no cap on the number of such visas. The NYT article also points out that the L-1 does not require employers to pay workers prevailing wages. The Mica bill, if passed, would ensure that L1 visa holders can work only in their own company premises and not at a client location.

OK. But why do large Indian companies like Infosys and Wipro have to worry? After all, these guys can get most of the work done at their offshore development centers, right?

Well, that is certainly the goal. But, in reality (going by the trend in recent quarters), the percentage of onsite revenues has been going up. Analysts attribute this phenomenon to the new types of services being offered by Indian companies--particularly package software implementation and consulting which require significant onsite work.

Well, so what? Indian companies wanting to send techies for onsite work have the good-old H1-B visas to fall back on, right? That's what Sridhar Ramasubbu, investor relations manager at Wipro told NYT.

But, there's a problem on this front. Even now, the number of H1-B visas issued each year (currently at 115,000) gets exhausted within just a few months after the US consulate begins issuing them each year. What's worse, the quota will drop to just 65,000 per year on October 1--unless the US Congress approves an extension, a move that NYT considers "unlikely".

The key question therefore is whether Mica's bill will get passed. And as Wipro's Ramasubbu assured the NYT, the company (and presumably, others in the industry), would lobby against it. Mica's colleague Jay Inslee, currently visiting India, presents some cause for optimism here. According to a report in the Economic Times, the Congressman said such bills are considered by many in US political circles as impediments to trade. "If we want access to the world markets then we can’t create barriers to flow of intellectual capacity," he said.

According to Inslee, it is in the interest of the US economy to help the Indian economy grow. "As long as there are 300 million Indian who earn less than $1 a day, there is not much hope of them buying US products."

Quite well said. But, hope Inslee and company are listening too.