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India-US H1B Debate: What’s at Stake

India-US H1B Debate: What’s at Stake

January 07, 2025 • Estimated Reading Time: 9 minutes

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Good morning. In today’s edition — exploring why the H1B visa remains a vital economic link between India and the US; telcos eye further tariff hikes in 2025; markets tumble amid new virus concerns; and the services sector shows resilience as the PMI index rises.

DECODE THE NEWS

Limiting H1B Visas Would Worsen America’s Existing Talent Shortage

The fourth edition of The Core’s series, 2025: Through The Trump Lens, delves into the indispensable role of Indian professionals in the US economy, especially amid ongoing H1B visa policy debates. With the US facing a critical shortage of 3.5 million STEM jobs by 2025, Indian talent has been pivotal. Skilled workers constitute 19% of the US STEM workforce, with Indians leading this segment, particularly at the doctorate level in fields like engineering and life sciences.

As US tech giants like Amazon and Google increased H1B visa reliance by 189% between 2015 and 2023, Indian IT firms reduced their usage by 56%, focusing on local hiring. Meanwhile, Global Capability Centres (GCCs) in India have expanded, generating $64.6 billion in revenue and hosting 17% of global capacity, underscoring the interdependence of US and Indian talent ecosystems.

Visa restrictions, if imposed, could exacerbate the US talent shortage, impacting innovation and economic growth. Indian-origin leaders like Sriram Krishnan are shaping US policy, while debates on balancing brain drain, remittances, and talent retention continue in India. Although exports argue that this talent exchange is vital for both nations, India faces challenges in retaining its best minds. The ongoing H1B debate reflects broader questions about balancing immigration policies and economic competitiveness for both countries.

PODCAST

On Episode 474 of The Core Report, financial journalist Govindraj Ethiraj talks to Anindya Banerjee, Head Of Research for FX and Interest Rates at Kotak Securities as well as Dr Ishwar Gilada, infectious diseases expert and Secretary General at the People's Health Organisation-India.

Markets fall sharply as sellers take charge.
Rupee hits another low, decoding India’s foreign exchange strategy.
Indian meal prices are up but unusually more for non vegetarians.
The HMPV virus spooked the stock markets yesterday, an infectious disease expert view on what it really means.

Click to listen to the full episode.

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CO:RELATION

Making Tough Calls in 2025

Telecom companies have done well in 2024. Share prices gained in anticipation of the positive effect of the 5G rollout and better pricing power. Shares of Bharti Airtel and the state-owned Mahanagar Telephone outperformed benchmark indices hands down. The year ahead seems to be challenging, though. For public sector companies, there are expectations of budgetary support. Large private sector players have deployed considerable capital to roll out the 5G infrastructure.

For returns on capital employed to be adequate, there needs to be a 25-35% hike in average revenue per user or ARPU, according to India Ratings, an affiliate of global ratings agency FITCH. That translates into a per-subscriber hike in tariff of Rs 60 to Rs 70. Such an increase in tariff would likely continue in small amounts over the next several quarters. That may be good for investors and creditors but not for consumers. It may not be easy to pass it on. As a result, India Ratings expects only a 6-10% tariff hike in 2025-26. That shows companies must optimise and grow the subscriber base cautiously to improve realisation.

CORE NUMBER

59.3

📈 This is the Purchasing Manager’s Index (PMI) in December, which is a four-month high compared to 58.4 in November, driven by robust demand, according to an HSBC survey. The index outpaced manufacturing, which slumped to a 12-month low. Finance and insurance led new orders and business activity. Despite this, quarterly services activity hit a four-quarter low, and international orders dipped to a three-month low. Inflation eased, but input costs pressured service providers to hike fees. The government is set to release GDP figures, projecting 6.5 - 7% annual growth amid global headwinds.

FROM THE PERIPHERY

—🏗️ Indian construction firms are estimated to witness slower revenue growth of 8-10% in FY25, down from 12-15% in previous years, according to credit rating firm ICRA. The slowdown is attributed to the impact of the Model Code of Conduct in Q1 FY25, prolonged monsoons, and milestone-based billing in Q2. Revenue for H1 FY25 rose just 1.5% year-on-year for ICRA’s sample of 19 firms, with road projects particularly affected. Urban transport and water projects showed healthy order inflows, but steep discounts in road projects pressured margins. ICRA expects FY25 margins to be at 10.5-11%, maintaining a stable outlook for the sector despite these challenges.

—🔽 Indian equity markets plunged into the red on Monday, with the BSE Sensex dropping over 1,400 points to fall below the 77,900 mark, and the NSE Nifty50 slipping more than 400 points to trade below 23,600. The total market capitalisation of all listed companies on the BSE decreased by approximately Rs 11.85 lakh crore, bringing it down to Rs 437.93 lakh crore. The detection of three cases of Human Metapneumovirus (HMPV) in India raised public health concerns, influencing investor sentiment. Key sectors affected included banking and consumer goods, influenced by corporate performance reports and health concerns over HMPV cases.

—💸 Infosys, India’s second-largest IT services firm, has deferred its annual wage hikes to Q4FY25, citing global demand uncertainties and weak discretionary IT spending, Moneycontrol reported. The last hike came in November 2023, though such raises are typically rolled out earlier. Infosys had previously delayed wage hikes during the pandemic in 2020, reflecting similar caution amid macroeconomic challenges. Rivals HCLTech and LTIMindtree also skipped increments recently. Infosys’ Q2 net profit rose 2.2% to Rs 6,506 crore, supported by Project Maximus cost optimisations.

—🏢 In 2024, supply additions, or completed office projects in the country stood at 52.3 million square feet, marking a 9% decline year-on-year, according to a report by real estate consultancy firm CBRE. Bengaluru, Hyderabad, and Pune collectively accounted for 67% of the total new supply, leading the supply additions across major Indian cities. Bengaluru continued to dominate leasing activity in 2024, accounting for 28% of total leasing at 4 million square feet, driven by technology firms and global capability centres (GCCs). Mumbai contributed 15% of the leasing activity at 5.7 million square feet, with significant demand from sectors such as banking, financial services, and insurance (BFSI).

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