Introduction

India–US relations have recently witnessed renewed diplomatic and trade engagement, indicating a potential thaw in bilateral ties. However, this progress has been complicated by the Trump administration’s decision to raise H-1B visa fees—a move that disproportionately affects Indian nationals, who make up the majority of recipients under the programme. This development underscores the underlying tension between strategic alignment and economic protectionism within the relationship, highlighting how short-term domestic politics in the US can disrupt long-standing partnerships.

Understanding the H-1B Visa and Its Significance

What is the H-1B Visa?

The H-1B is a non-immigrant visa that allows U.S. employers to hire foreign workers in specialty occupations that require technical expertise, such as in IT, engineering, medicine, and finance.

Why is it crucial for India?

• Approximately 70% of all H-1B visas are issued to Indian nationals.
• Indian IT firms such as Infosys, TCS, HCL, and Wipro rely heavily on these visas to deploy skilled professionals on projects in the US.
• Remittance flows are significantly impacted—according to RBI data, the US accounted for 27.7% of India’s total remittances in 2023–24.

The US Perspective

The Trump administration has argued that Indian IT firms have “manipulated” the system to displace American workers, thus justifying a hike in visa fees as a protectionist measure aimed at preserving domestic jobs.

From Trade Tariffs to Skilled Labour Protectionism

The move to raise H-1B visa fees is part of a broader protectionist shift in US policy.

• Earlier measures focused on tariffs targeting Indian exports in manufacturing sectors such as textiles, metals, and engineering goods.
• The current step represents an extension of this approach into services and high-skilled employment—areas where India holds a comparative advantage.

This dual pressure—on both low-skilled manufacturing and high-skilled IT services—places Indian businesses in a vulnerable position, limiting both export opportunities and labour mobility.

Implications for the US Economy

Although framed as a pro-American-worker policy, the H-1B fee hike could have negative repercussions for the US itself:

• Increased operational costs: US firms may struggle to fill skill gaps domestically, making talent acquisition more expensive.
• Harm to innovation: Immigrants have historically driven US innovation. Economist Giovanni Peri noted that 26% of US Nobel laureates (1990–2000) were immigrants. Research by Anderson & Platzer found that 25% of founders of venture-backed companies (1990–2005) were foreign-born.
• Talent redirection: With visa-related costs soaring up to $100,000, highly skilled professionals may prefer relocating to more welcoming regions like Canada, Europe, or parts of Asia.

Impact on India’s IT Sector

The Indian IT industry, which has long relied on the H-1B route to serve US clients, now faces multiple challenges:

• Short-term disruptions: Project costs for major firms like Infosys, TCS, HCL, and Wipro are set to rise. On-site deployments in the US may be delayed, impacting client timelines.
• Structural weaknesses: Indian IT companies are already grappling with automation, the adoption of AI, and a global demand slowdown. Their traditional labour-arbitrage model—offering low-cost programming and tech support—is under increasing strain.
• Remittance vulnerabilities: Any significant drop in Indian professionals working in the US will likely lead to reduced remittance inflows, affecting India''s foreign exchange reserves and consumption economy.

Potential Opportunities and Strategic Reorientation

Despite the immediate setbacks, India can potentially turn the situation to its advantage:

• Rise of Global Capability Centres (GCCs): Visa restrictions may incentivise companies to expand offshore operations in India. According to Wharton researcher Britta Glennon, previous H-1B curbs led to a notable increase in offshore hiring in India, Canada, and China. India can position itself as a hub for global R&D, analytics, and backend services.
• Domestic Ecosystem Development: There is a strong case for building Silicon Valley-style innovation clusters within India. This requires comprehensive reforms in education, research funding, and academia–industry partnerships.
• Policy Support: Initiatives such as Digital India, Startup India, and the PLI scheme for IT and electronics can be leveraged. Skill development programmes must be expanded to align with emerging global demands in AI, cybersecurity, and advanced engineering.

Geopolitical Dynamics and Strategic Convergence

Despite economic frictions, the strategic aspect of the India–US partnership remains robust:

• Indo-Pacific cooperation continues under the Quad framework.
• Defence partnerships remain strong, with India signing foundational agreements like COMCASA, BECA, and LEMOA.
• Climate and clean energy collaboration also form an important pillar.

Yet, the recurring nature of trade and visa-related disputes exposes the weakness of the economic leg of the bilateral relationship, which lacks the institutional stability seen in strategic or defence ties.

Challenges for Indian Policymakers

India faces multiple challenges in responding to US policy shifts:

• Limited leverage: Immigration is a sovereign matter, and India has minimal direct influence over US visa decisions.
• Overdependence on a single market: The reliance on the US for both IT services and remittances makes India vulnerable to abrupt policy changes.
• Need for structural transformation: India must raise the quality of its higher education system. Investment in innovation ecosystems and encouraging product-based business models (beyond cost-effective services) is essential.

Way Forward

1.              Bilateral Engagement: India must engage with US policymakers to seek a rollback or moderation of the visa fee hike. Discussions must move beyond trade tariffs and include mobility of professionals as a permanent agenda item in bilateral talks.

2.              Strengthening Domestic Capabilities: Investment should be channelled into future-ready sectors such as AI, quantum computing, and semiconductor design. Global Capability Centres should be scaled up to retain talent that would otherwise migrate. The startup ecosystem must be incentivised to move from service provision to genuine innovation.

3.              Diversification Strategy: Indian IT firms should actively expand into European, Japanese, and ASEAN markets. India should push for more Social Security Agreements to ensure the welfare of Indian professionals working abroad.

4.              Long-Term Vision: India must aim to become a global innovation powerhouse, not just a back-office for Western firms. By strengthening domestic income sources, India can reduce its dependence on remittance inflows and build a more resilient economy.

Conclusion

The H-1B visa fee hike represents more than just a bureaucratic barrier—it strikes at the core of India’s IT-driven engagement with the United States. While the strategic dimension of the bilateral relationship continues to strengthen, the economic and human capital linkages face growing stress due to protectionist shifts in US policy. India must approach this moment with a dual strategy: sustained diplomatic engagement with Washington and a bold domestic transformation agenda. In an increasingly uncertain global environment, India’s success will depend on its ability to be adaptive, self-reliant, and forward-looking.