The recent increase in H-1B visa application fees to $100,000 is expected to have a limited immediate impact on Indian IT services firms, according to a report by Franklin Templeton. Analysts noted that Indian companies have significantly reduced reliance on H-1B visas over the past decade through increased offshoring and localisation strategies.
The report, however, cautioned that medium-term effects could be more pronounced. Higher costs for US-based delivery may raise the overall cost structure, prompting companies to reassess operating models and explore mitigation strategies. The impact is expected to vary based on each firm’s US exposure, onsite workforce composition, and dependence on non-local talent.
Historically, H-1B-related challenges have arisen more from executive actions than legislative changes, and cost pressures have already been building from prior visa restrictions. Franklin Templeton added that supply-side disruptions generally pose the greatest threat in high-growth conditions, which are not currently present.
“As H-1B lotteries and petitions primarily occur in Q4–Q1, the earliest significant impact is likely in FY27 petition cycles,” the report stated. To counter higher costs, IT firms are expected to accelerate offshoring, expand nearshore operations in Canada and Mexico, pursue acquisitions in Europe and Asia-Pacific, and invest in automation and AI to improve efficiency.
The report also noted that Global Capability Centres (GCCs) in India could become more attractive to talent as onsite opportunities decline, while clients continue to demand efficiency and better rate realisation.
India’s equity markets may see short-term volatility due to these changes, though overall valuations remain elevated relative to historical averages. IT sector valuations have corrected over the past 6–12 months amid weaker demand, but the broader corporate earnings outlook is improving thanks to domestic consumption recovery and increasing private sector capital expenditure.
Global risks, including US tariffs, could present short-term challenges for export-driven sectors, yet India’s macroeconomic fundamentals remain robust. The report highlighted that a potential US trade agreement in the latter half of 2025, coupled with strengthening domestic demand and clearer earnings visibility, could provide positive momentum for the market in upcoming quarters.
