👌IT firms bullish on higher spending due to tax cuts – Industry News | The Financial Express

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The US is the largest market for India’s $254 billion tech sector where its overall contribution is $80 billion to American GDP, Nasscom said in a statement.

Tata Consultancy Services (TCS), Infosys, and Wipro, are among the largest recipients of H-1B visas. (Image/Reuters)

Barring apprehensions on the possibility of a tighter H1-B visa norms, IT services firms seem to be upbeat with the victory of Donald Trump, in the hope that policies pursued by him would lead to higher discretionary spending by enterprises.

Analysts said that the US has a lot of work to do in sectors like banking and healthcare, which are currently under penetrated. Manufacturing is also facing challenges, so, the expectation is that IT project spending would rise. Most enterprises are already holding discussions with IT firms about their next year’s budget, which is expected to be finalised in the next two-three months.

The Republican Party’s promise to cut corporate tax rate, has also raised hopes of the IT firms. Any proposal to cut the tax could stimulate the budgets of US firms, thereby enhancing discretionary spending, a trend that may benefit India’s IT sector, many analysts said.

Trump has signalled that his administration would reduce the existing 21% corporate tax rate to 15% for companies that manufacture goods within the United States. Although specific eligibility criteria in this regard is still unclear.

“If US companies have to pay less taxes, probably they can spend more on digital investments since many firms have allocated limited budgets in the last two years. So this way some of the discretionary spend can be revived,” Pareekh Jain, CEO of engineering insight platform, EIIRTrend, said.

IT industry body, Nasscom on Wednesday said it looks forward to working closely with the new US administration to strengthen the dynamic technology partnership as the tech sector is the “key lynchpin” of the US-India bilateral engagement.

The US is the largest market for India’s $254 billion tech sector where its overall contribution is $80 billion to American GDP, Nasscom said in a statement.

Notably, the industry plays a key role in supporting US companies in strengthening the American economy.

Conversely, India is a prime destination for American businesses, with over 1,000 US companies driving innovation and leveraging India’s digital infrastructure to create competitive solutions, according to Nasscom.

However, the main area of concern is the possibility of restrictive H1-B visa norms. Trump’s first term saw attempts to restrict the H-1B visa programme by narrowing eligibility criteria and increasing scrutiny of applications. It is feared that the number of H1-B visas might be reduced, and the cap system could be adjusted to favour those with advanced degrees or specialised skills.

However, according to a JM Financial report IT services firms are now quite insulated from such anti-immigration policies than they were in 2016.

“All players have ramped up local hiring in the US. Majority of their US employees are now not dependent on visa (local/green card holders). The impact of such policies on players’ ability to deliver service or impact on margins due to cost inflation etc could therefore be limited,” the brokerage said.

Tata Consultancy Services (TCS), Infosys, and Wipro, are among the largest recipients of H-1B visas.

Nilesh Tribhuvann, managing partner at White & Brief – Advocates & Solicitors, said that under a Trump administration, a return to stringent H1-B regulations, rigorous scrutiny and restrictions could be expected. “This would likely compel Indian IT companies to adapt by investing further in local hiring and onshore talent pools,” he said.

However, there are indications that Trump’s renewed term may bring a different perspective to the H1-B policy. “With Elon Musk and many tech corporates publicly supporting Trump might actually favour high-qualification immigration process as their companies will want to poach talent from outside,” Jain said.