Services exports, particularly from India, are feeling the impact of the latest directive from US President Donald Trump on H-1B visas as his administration looks to curb immigration in the country. The US government’s recent hike in H-1B visa fees from roughly $1.5–4K to $100,000 annually applies only to new visa applications and does not affect existing holders or renewals.
However, analysts warn that if sustained, this move could disrupt Indian IT exports, pressurise project margins, challenge traditional delivery models, and complicate on-site project execution.
Trump tariffs extending to services?
Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital, highlighted the broader context, “Indians receive nearly 70 per cent of H-1B visas in the US. The timing of this order, just days before critical India-US trade deal discussions, suggests it is more of a negotiating tactic than a strategic immigration reform.”
The rapid changes in narrative within hours of the announcement further reinforce that this is a tactical move rather than a well-thought-out policy, he added.
Meanwhile, Sandeep Pandey, Co-founder of Basav Capital, said the H1-1B visa fee hike by the US administration can be termed Trump’s tariff 2.0.
After imposing taxes on the industries of its trade partners, the While House is looking at the service industries of its trade partners, and this is not restricted to India only, he said, adding that it will be imposed on all its trade partners, including China and EU nations.
“The basic reason for such a move is to generate money, as bond yield in the US suddenly surged from 3% to more than 5%. As the US Treasury is government-backed, the American government faces a payment challenge for bonds maturing soon,” he added.
Outlook for the Indian IT Sector
Indian IT and software’s gross and net exports stood at $181 billion and $160 billion, respectively in FY25. Emkay Global projected the net IT services export growth of 5 per cent for FY26 and a 7 per cent CAGR over the next five years.
These growth rates could be reduced to below 4 per cent if H-1B visa-related risks persist, alongside the evolution of Global Capability Centres (GCCs), which currently account for over $65 billion in gross exports.
Emkay, however, maintained its FY26 forecast, with the current account deficit to GDP ratio projected at 1.2 per cent and net remittances expected to remain around $120 billion, similar to FY25, while cautioning investors on potential downside risks from future policy updates.
It sees near-term impact on revenues and margins for larger IT firms to be limited, given their consistent reduction in H-1B dependence to 20–50 per cent of US operations. These companies are increasingly relying on local hires, US delivery centres, automation, and subcontracting models, opined the brokerage.
In contrast, medium and smaller IT firms, which still depend heavily on traditional “bodyshopping” export models, may face more significant challenges as they transition toward larger firms’ local hiring and operational strategies, added the brokerage.
Indian IT Sector Crash
The Indian IT sector reacted sharply to the development, with the Nifty IT index tumbling over 3.5 per cent in intraday trading on Monday, significantly underperforming the benchmark Nifty, which fell just 0.5 per cent. All constituents of the Nifty IT index were in the red.
Tech Mahindra emerged as the top loser, dropping 5.8 per cent, followed by Mphasis and Persistent Systems, each down more than 5 per cent. Leading IT stocks like TCS, Wipro, Infosys and HCL Technologies lost up to 5 per cent each.
Nikhil Gangil, Investment Manager at Smallcase and Founder of Intrinsic Value, added that IT companies are the primary beneficiaries of H-1B visas and are now facing a negative trigger after years of overvaluation.
“The pain is likely to persist in the mid-term, and investors should remain cautious. Nonetheless, Indian IT will emerge stronger in the long run. Staffing and visa service companies, such as BLS International—where 83 per cent of revenue comes from visa services—could face immediate headwinds,” he said.
Other sectors to be impacted
Sumit Pokharna, VP of Fundamental Research at Kotak Securities, also noted that the ripple effects of the policy will extend beyond Indian IT companies.
“Resistance will be felt across multiple sectors, including big tech and large enterprises in banking, retail, and other industries. Organisations in non-IT verticals will also encounter challenges due to the elevated costs and staffing implications,” he said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
