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Trump triumphs: Should Indian IT industry be worried?

Cost of business could go up, but nothing dramatic that might skew the playing field is expected, analysts say

Harichandan Arakali
Published: Nov 9, 2016 02:36:05 PM IST
Updated: Nov 9, 2016 04:54:06 PM IST

Trump triumphs: Should Indian IT industry be worried?

The Bombay Stock Exchange’s IT index, BSEIT, was lower by nearly 4.6 percent, from Tuesday’s close, at 12:16 p.m. on Wednesday, as India’s capital markets investors took in the news that real estate tycoon Donald J. Trump could be America’s next president. By the time that became a certainty, the index was already recovering, as it also became clearer that the Republican party would retain control of the Senate and the House of Representatives.

Republican party candidate Trump, who in his victory speech, said the “forgotten people of America … will no longer be forgotten,” and that he wants to “harness the creative talent of the best and the brightest” in the US, is seen as a strong critic of the H-1B visa program — vital to Indian IT.

India’s IT outsourcing services providers such as Tata Consultancy Services and Infosys have been increasingly criticised in the US as the biggest beneficiaries of a program. The IT companies have used the H-1B non-immigrant visas to import cheap labour from India to work at their client sites, denying jobs to Americans, critics of the program say.

In a recent report, in October, securities analyst Ankur Rudra at Hong Kong-based brokerage CLSA, had this to say on the impact of the outcome of the US presidential election, and how that would combine with who controls the US Senate and congress, the upper and lower houses of law makers in the country: “A US president has limited authority on immigration issues, and laws depend on the structure of both Congress chambers: Senate and House of Representatives.”

Results out at this time suggest the Republicans have pulled off a hattrick, keeping control of the Senate and the House of Representatives as well. That means the Indian IT sector should actually be relieved, if one were to infer from Rudra’s analysis.
 
“Trump in the White House with a Republican Senate will likely see piecemeal legislation focused on increasing the cost of doing business, so this is unlikely to change the playing field among Indian IT versus local champions,” the analyst says in his report.

A tad more sombre comment comes Arup Roy, a research director at Gartner Inc., which advises large businesses on their IT decisions: “A sub 10 percent growth for the current fiscal year is certain,” for the sector. And the industry is already battling changes in financial services, healthcare verticals and the impact of shift towards cloud computing and automation, he says. The degree to which Trump’s “protectionist views” translate to US government policy remains to be seen, but it adds to the uncertainty, Roy said.

TCS was down 4.3 percent at close of Mumbai trading, while Infosys fell 2 percent, whereas Wipro — with the lowest exposure to America among India’s top three IT companies — was lower by about 0.3 percent. The BSEIT index was just about 3 percent lower.

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