Analyst Views On How Biden Will Help Indian IT Sector

As Joe Biden beat President Donald Trump in the U.S. elections, analysts say visa restrictions for software engineers sent by Indian IT companies could ease.

Trump has tightened norms for H-1B visas, mostly used by software services providers to send engineers for on-site work. That prompted IT companies to ramp up hiring local talent in the past three years, increasing costs in the market that contributes 50-65% of the revenue for India’s five largest IT firms. A Biden presidency is, however, seen to be less hostile to immigrants.

Here’s how Biden’s win is likely to impact IT companies, according to analysts:

There could be easing of policies related to H-1B visas and other issues including country limit on green cards being removed, according to Madhu Babu, analyst at Centrum Broking. In the short to medium term, however, this is immaterial as Covid-19 and work from home are likely to only accelerate offshoring, he said in a report.

But over the long term, onsite wage inflation will drop and reliance on high-cost subcontractors could moderate, he said.

Biden is obviously better from the immigration perspective and continuous rejection of visa will come down, lowering on-site costs, Amit Chandra, analyst at HDFC Securities, told BloombergQuint. If there is an increase in the H-1B quota and removal of country caps, it will help Indian IT companies to plan their resources in a better way, he said.

Another angle is that Biden is more supportive of lockdowns and can increase the corporate tax rate, he said, adding this can have an impact on IT spends over the medium to long term.

The Biden presidency would not have any immediate direct impact on the Indian IT services sector but a higher corporate tax may be a long-term positive prospect for offshoring, Rahul Jain, vice president of research at Dolat Capital, told BloombergQuint. American companies may look for more cheaper alternatives, especially as concerns on security in offshoring are at multi-year lows given immaculate remote execution displayed by Indian IT peers during Covid-19, he said.

The near-term potential impact on IT budgets should get mitigated given the ongoing digital acceleration wave, he said, maintain a positive view on the sector in the short to medium term.

Biden is marginally positive for IT companies as he is perceived to be less aggressive than Trump on outsourcing and visa restrictions, Dipan Mehta, director at Elixir Equities, said over the phone.

Over the longer run, the new presidency will push for large stimulus as was promised by Biden, and that should boost the U.S. economy, make the growth more broad-based and provide more opportunity for Indian IT companies, he said.

The H-1B visa ban rollback is something which Biden had been advocating during his campaign, Mayuresh Joshi, head of equity research at William O' Neil, said over a message to BloombergQuint. If this is reversed, he said, it will be good for the sector as a whole.

Sanjeev Prasad, analyst at Kotak Securities, said in a report that he does not see any major shift in economic policies, especially related to immigration and trade relations with China.