US IT Salvo Opens New Front for India [Prelims Bits]

13 Oct 2026

Tags: Prelims   Current events of national and international importance

Source: The Indian Express

Context: The US government's decision to suspend major Indian IT firms from the Permanent Electronic Registration (PERM) programme has raised concerns over skilled-worker mobility, India's services exports and the broader India–US economic relationship.

 

US Restrictions on Indian IT Firms

• PERM programme suspension: The US administration's decision to suspend major Indian IT firms from the programme, which provides a pathway towards permanent residency through employment-based immigration, has increased uncertainty for companies dependent on skilled foreign workers.
• H-1B visa fee: The move follows the administration's earlier decision to introduce a $100,000 fee for H-1B visas, increasing the potential cost of employing foreign professionals in the US.
• Limited immediate impact, broader risks: According to a report cited from ICICI Securities, Indian IT firms accounted for less than 2% of the 1,17,849 PERM applications filed between October 2024 and September 2025. However, the article warns that wider work-visa restrictions could pose a significant risk to India's services exports.

Economic Significance for India

• Services exports: India's software, business and other services exports stood at approximately $221 billion in 2025–26, making them an important source of foreign-exchange earnings.
• Skilled-worker mobility: Restrictions on employment-based immigration may increase staffing costs, disrupt overseas project delivery and encourage Indian IT companies to expand local hiring or offshore operations.
• Broader economic exposure: The impact extends beyond individual IT firms to India's services trade, professional mobility and the competitiveness of Indian businesses in the US market.

India–US Trade Tensions

• Proposed tariffs: The article reports that a newly passed US law could enable tariffs of up to 100% on imports from countries such as India and China that purchase energy from Russia. The actual impact would depend on the implementation and scope of the relevant measures.
• Russian oil imports: Between December 2022 and August 2026, China accounted for approximately half of Russia's crude exports, while India accounted for 37%, according to the Centre for Research on Energy and Clean Air (CREA).
• Policy contradiction: The article highlights the contrast between US pressure on countries purchasing Russian energy and Washington's own reported arrangement to procure Russian diesel for US and global markets.

Uncertainty over the India–US Trade Deal

• Stalled negotiations: US Trade Representative Jamieson Greer reportedly stated that a trade agreement was not imminent. India's Finance Minister also indicated that negotiations had reached a plateau beyond which further progress could be difficult.
• Multiple pressure points: Uncertainty surrounding the trade agreement is compounded by restrictions affecting labour mobility, potential tariffs and risks to India's services exports.
• Implications for bilateral relations: These developments complicate efforts to strengthen economic cooperation between India and the US, despite the strategic importance of their partnership.

Implications for India

• IT industry: Higher immigration costs and uncertainty may affect the business models of Indian IT companies that rely on deploying skilled professionals to client locations in the US.
• Employment: Reduced overseas mobility could affect opportunities for Indian technology professionals, while potentially encouraging more domestic employment and offshore delivery.
• External sector: Services exports are a significant source of foreign-exchange earnings; restrictions could affect export growth and India's external-sector resilience.
• Trade negotiations: Immigration, tariffs, energy purchases and market access may become increasingly interconnected in bilateral negotiations.

Way Forward

• Diversify export markets: Expand IT and business services exports to Europe, East Asia, West Asia and other emerging markets to reduce dependence on the US.
• Strengthen offshore delivery: Invest in digital infrastructure, advanced technology and remote-service capabilities to reduce reliance on the physical movement of workers.
• Diversify energy sources: Balance energy security and affordability with the implications of international sanctions and trade measures.
• Pursue diplomatic engagement: Seek predictable immigration rules, mutually beneficial trade arrangements and resolution of outstanding bilateral economic issues.
• Move up the technology value chain: Strengthen domestic research, innovation, AI capabilities and high-value technology services to improve India's global competitiveness.

Additional Information

1. PERM and H-1B: Key Differences

• PERM labour certification: The US Department of Labor's process for determining whether an employer can generally hire a foreign worker for a permanent position without adversely affecting qualified US workers. It is ordinarily one step in the employment-based permanent-residency process, not a visa itself.
• H-1B visa: A temporary, non-immigrant visa category for foreign workers in qualifying specialty occupations, subject to applicable eligibility requirements and restrictions.
• Key distinction: PERM is associated with employment-based permanent immigration, whereas H-1B enables temporary employment. Restrictions affecting these pathways have different legal and economic consequences.

2. Importance of Services Exports

• Services exports generate foreign-exchange earnings, support skilled employment and strengthen India's position in global value chains.
• India's IT and business-process services sectors are important contributors to the services trade surplus, helping offset part of the merchandise trade deficit.
• Predictable immigration rules, diversified markets and greater domestic technological capability are essential to sustaining export competitiveness.