[op-ed snap] Facing up to IT: On visa rules posing challenge to Indian IT companies

India’s IT Sector:

  1. A globalising world enabled the spectacular rise of India’s IT industry over the last couple of decades
  2. The IT sector not only pulled up the GDP but also came to symbolise young India’s aspirations

Challenge it faces:

  1. With the world now bending towards protectionism, it faces a challenge to its talent-centric, software export model
  2. In recent weeks, a slew of countries, which are estimated to account for three-fourths of the industry’s revenues, have placed stricter rules on their companies getting talent from overseas
  3. There are visa rule changes for Indian tech personnel after Brexit and Donald Trump’s victory in the U.S. after promises to put the brakes on outsourcing

Protectionism:

  1. President Trump signed the ‘Buy American, Hire American’ executive order last week
  2. He was seeking to raise the bar for the award of H-1B visas, an important route for Indian companies, so that they are given to the “most-skilled or highest-paid” beneficiaries
  3. Earlier this month, the U.K. scrapped a category of short-term visas that have been used extensively by Indian companies to get their IT professionals on-site
  4. The Australian equivalent of this is the recent junking of what are called the ‘457 visa’ rules
  5. Singapore has reportedly kept approvals for work permits on hold for a while now

The way forward:

  1. It is still too early to gauge the exact impact on IT companies, because much depends on their ability to rework their operational models to do less on-site
  2. It is a challenging time for the industry – with slowing business growth, strengthening rupee and difficult transition from a traditional model to one that is cloud-based
  3. Indian IT companies are getting the lion’s share of H-1B visas for Indian nationals
  4. The government, which has reportedly sought a World Trade Organisation-backed framework to facilitate trade in services in the light of rule-tightening by the developed countries, is naturally concerned
  5. The industry, which employs over 3.5 million people and earns over $100 billion in export revenues, is now navigating a world with walls

Note4Students:

Read the op-ed to understand the changing global scenario.

After scrapping 457 visa, Aus unveils tougher citizenship laws

  1. What: Announcing sweeping changes to Australia’s citizenship laws, PM Malcolm Turnbull unveiled tighter requirements for new applicants, a move that follows the scrapping of the 457 visa program for foreign workers
  2. Under the new reforms, the applicants must be permanent residents for at least four years — three years longer than at present — and must be committed to embrace “Australian values“
  3. Background: The move comes after Australia announced it would abolish the popular 457 work visa used by over 95,000 foreign workers — a majority of them Indians — to tackle the growing unemployment in the country
  4. And replace it with a new programme requiring higher English-language proficiency and job skills

Note4students:

Part of a trend worldwide in which govt’s are tightening immigration. This can impact Indian service industry. Other countries which have taken such measures include the US and New Zealand.

Phased approach to adopt standards

  1. Context: CII paper on ‘Challenges of Standards and Technical Regulations’ recommends a phased implementation of standards
  2. Standards adoption is a time and resource consuming process
  3. Recommendations: Government should encourage standards at least in those sectors more prone to consumer safety and security
  4. In the first phase, export-oriented services could be focused, where awareness about international standards exists
  5. In the second phase, services that are important for exports, but lacking standards, such as logistics, can be targeted to adopt internationally acceptable standards

Significance of services for India

  1. Contribution: The services sector accounts for over half of India’s GDP and its foreign investment inflows as well as more than a quarter of its total trade
  2. India has also found a place in the top ten World Trade Organisation-member countries in services exports and imports
  3. Despite services being such a crucial part of the country’s economy, there has so far been no institutional framework on services trade data collection and analysis
  4. The government has been relying on the Reserve Bank of India for services trade data

A background on services trade data framework

  1. Panel: In 2011, an expert panel was set up by the Central Statistical Office for identifying the gaps in collection and analysis of services trade data
  2. Following the panel’s report, another panel was constituted in November 2013 under the chairmanship of the DGCI&S
  3. DGCI&S: Asked the Delhi-based think-tank ICRIER to submit a report on four service sectors- logistics, audiovisual, professional and telecommunication
  4. The ICRIER report with policy recommendations and the problems related to collection and analysis of such data will be released on June 7

Agency to analyse services trade data- II

  1. Legality: To ensure legal certainty to the framework, the above provisions could be incorporated as amendments to the Collection of Statistics Act, 2008
  2. A new law is also being considered as the Collection of Statistics Act is not specific to services sector
  3. Nodal agency: It could be the Directorate General of Commercial Intelligence and Statistics (DGCI&S- currently compiles and analyses only goods trade data) or an entirely new one
  4. Deterrent: There could be stringent penalties for misreporting and for failing to report

Agency to analyse services trade data- I

  1. Context: The Centre will soon establish an institutional framework for better collection and analysis of data on India’s services export and import
  2. Objective: To improve targeting of incentives based on services exports
  3. Also to firm up a superior strategy for the country to be used in negotiations on bilateral free trade agreements as well as on regional and multilateral trade pacts
  4. Framework: Setting up of a nodal agency for international trade data in services, creation of an international services trade business directory
  5. Also, provisions mandating enterprises to report their international services trade to the proposed nodal agency


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