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JUNE 17, 2007
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Rupee Rise
Though an appreciating rupee is a cause for concern for many industries, it is proving to be a boon for some, particularly those that have large foreign currency borrowings. A weaker dollar is making repayments cheaper. Also, state-run refineries and those in the aviation sector are well-positioned to benefit from the stronger rupee. The Indian currency is up 8 per cent this year and is Asia's strongest currency against the dollar in 2007.

The ECB Route
The cap on maximum external commercial borrowings (ECBs), an annual ritual for the government, is fast losing its significance. Since the bulk of the foreign borrowings is raised under the automatic route by companies, it is becoming difficult to enforce the cap. The government had raised the annual limit of ECBs last year from $18 billion (Rs 81,000 crore) to $22 billion (Rs 99,000 crore). Now, it seems that total inflows will cross the $22-billion mark.
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Business Today,  June 3, 2007

The H-1B Hullabaloo
The debate in the US over immigration has engulfed H-1B visas and IT offshoring. But curtailing work visas will only lead to more tech work being shipped out to India.
You've got mail: Infosys got the most H-1Bs last year

On may 14, as executives at TCS, Infosys and Wipro's US offices-in Arlington, Virginia; Fremont and Mountainview, California, respectively-were just getting over their Monday morning blues, something arrived in their mail rooms that deepened their funk. It was a letter from Senators Charles E. Grassley and Richard J. Durbin wanting to know how these companies-besides Satyam Computer Services, MphasiS Corp., Patni Computer Systems, L&T Infotech, Tech Mahindra, and i-flex-were utilising their H-1B visa workers. More specifically, the two-page letter sought details across four areas: Number of H-1B visas sought and how they were used; average wage of H-1B visa holders; body shopping of H-1B workers; layoffs in the US, and if any of those laid off were replaced by H-1B workers. In all, 21 different questions. "We appreciate your cooperation, and respectfully request that you respond to our questions no later than May 29, 2007," the Senators wrote.

The deadline expired a day after BT went to press, but until the 28th, none of the nine companies-BT contacted all-was willing to comment on the issue. Hardly surprising. The issue is highly inflammatory in the US, which is debating a new bill on immigration that will allow many of its 12 million illegal immigrants (mainly Mexicans) to reside legally, and also increase the number of work visas granted to foreign workers from 65,000 to 115,000 a year. While President George Bush has called the bill historic for what it seeks to achieve, opinion is divided among other Americans, including Senators, immigration experts, think-tanks, high-tech companies, and people at large.

Home Comfort: TCS is India's biggest IT firm but has fewer H-1BS

The US Senate, which debated the bill the third week of May, will reconvene early June to take up the issue once more. But before going on a recess, the Senate did manage to get decisions made on some key issues. On May 24, it voted in favour of a decision to increase fees imposed on employers who hire H-1B workers. The money will be used to fund scholarships in healthcare and the sciences (including computer science) for American citizens. Thanks to Senator Edward Kennedy, an amendment that would have ended H-1B visas for less-skilled workers starting 2012, was narrowly defeated. There were 48 votes for it, and only 49 against it.

Critics of the bill-at least, the part that pertains to temporary work visas-say that the proposed rules are cumbersome and unrealistic. For instance, employers hiring foreign workers may now have to prove that not only is the skill in question not available in the US, but also that it will not lead to displacement of any American workers. That means an IBM or a Microsoft may simply decide to expand their development centres outside of the US than go through an expensive, messy and time-consuming process of justifying H-1B hires. Neither Grassley nor Durbin, who are championing a review of H-1Bs, replied to BT's e-mailed questionnaire, but Beth Levine, a spokesperson for Grassley, did e-mail BT a statement that said, "Senator Grassley is in favour of increasing legal immigration avenues. But his questions to the Indian companies are an effort to gather more information because of allegations of fraud and abuse within the H-1B visa program."

Mum is the Word

NASSCOM's stand is that work permits and intra-company transfers are issues related to trade, not immigration
Kiran Karnik
"Immigration and temporary movement of skilled workers are two different issues, but are unfortunately getting mixed up"
Arun Vakil
Immigration consultant

The Indian it industry, meanwhile, has simply decided to hunker down and let the storm blow over. For good reason. It has been growing at a compounded annual growth rate (CAGR) of 33 per cent over the last four years, with the top players growing their revenues and profits at faster rates. Joining issue with the ongoing debate may only roil the waters further, and put the spotlight on the top it companies. Therefore, the industry doesn't want to say or do anything that could affect its dream run in a country that fetches more than half of its revenues.

However, the industry association, NASSCOM, did issue a statement on May 15 that was meant to convey its members' sentiment. "The Indian it industry and NASSCOM do not see this as an immigration-related issue, but one related to international trade, and would urge that work permits and intra-company transfers (l-1 visas) not be intermingled and confused with immigration. Work permits are primarily a tool for facilitating trade and allow global companies to bring key staff to the US on temporary assignments, just as US staff often travel across the world (on) temporary assignments and this is clearly different from immigration," the Delhi-based agency said in a statement.

India's Union Commerce Minister Kamal Nath, meanwhile, has expressed surprise that the Senators decided to write directly to the companies instead of raising the issue through proper channels or at an appropriate forum. "Temporary movement of skilled professionals is an essential component of the global services economy and bears no relation to immigration rules," Nath has been quoted as saying. "Unless we see forward movement in such areas, it will be difficult for India to enhance its commitments in the services negotiations," the minister has said, (possibly much to the industry's horror) in what can be construed as a veiled threat to American trade negotiators.

My job's gone: Critics say the visas are unfair to Americans

A Contentious Issue

As far as the H-1B part of the debate is concerned, there are two primary concerns that some policymakers have. One, that cheaper workers are displacing Americans and, two, that they are depressing local wages. For instance, Ronil Hira, assistant professor of public policy at the Rochester Institute of Technology, and author of Outsourcing America: What's Behind our National Crisis and How We Can Reclaim American Jobs, says that Microsoft's Bill Gates has created the impression that all H-1B workers earn $100,000 (Rs 41 lakh) a year, simply because that's how much the software giant claims to pay them. The reality, says Hira, who's also the Vice President of Career Activities for IEEE and, hence, very interested in furthering the study of electronics and electrical engineering in the US, is that the median wage for new H-1B computer professionals is just $50,000 (Rs 20.50 lakh). "That means half earn less than $50,000. This is less than the starting salary for a freshly-minted Bachelors holder in Computer Science," says Hira, a second generation Indian immigrant.

Other critics such as B. Lindsay Lowell, Director of Policy Studies, Institute for the Study of International Migration, Georgetown University, say that part of the wage difference is "due to the lack of easy portability between employers, which means that (the workers) can't negotiate a higher wage for new employment opportunities." But he adds that "there is also a small segment of employers that employs H-1Bs particularly because they know they can get away with paying them less or working them more."

While it's a fact that H-1B workers, and not just those employed in it or with Indian companies, tend to make less than their American peers, what must not be forgotten-at least in the case of Indian it companies-is that such temporary workers often continue to receive their rupee salaries back home, besides other benefits, on top of their dollar salaries. Is that unfair to American workers? Perhaps, but that's a consequence of free and integrated world trade. Says Arun Vakil, a Mumbai-based immigration consultant and author of Gateway to America: "Immigration and temporary movement of skilled workers are two different issues, but are unfortunately getting mixed up."

The H-1B protagonists: Senators Grassley (L) and Durbin suspect that Indian IT companies are misusing H-1B visas and suppressing wages

The argument that H-1B workers are displacing American workers also seems exaggerated. A study put out recently by Virginia-based National Foundation for American Policy, and reported by the Washington Post, reveals that new H-1B visa workers made up 0.07 per cent of the total American workforce in 2006 and that 57 per cent of them had advanced degrees. The study also points out that "there is little evidence native information technology (it) workers are harmed by the entry of H-1B professionals." In fact, citing a study by Madeline Zavodny, a research economist at the Federal Reserve Bank of Atlanta, the study says, "None of the results suggests that an influx of H-1Bs lowers contemporaneous average earnings. Indeed, many of the results indicate a positive, statistically significant relationship."

The study further points out that "the current low unemployment rate of 2.8 per cent in the category of programmers means fewer than an estimated 17,000 computer programmers nationwide are unemployed, with the vast majority facing 'frictional' unemployment, simply between jobs, or located in the wrong geographic area or possessing the wrong skill set. There is no evidence this rate would be lower even if the US stopped the entry of all H-1B professionals".

It's not the first time that the US is debating its approach to immigration or that workers affected by the changing dynamics of world trade are venting their feelings. But the problem is, as Lowell puts it, "the very large 12 million illegal residents who take up all the air in the room and squeeze out meaningful discussion about highly-skilled visa classes". One thing is for sure: Almost every company and policymaker understands that shutting the doors to skilled workers would tantamount to shipping out skilled work for good. That's a bargain the world's largest economy won't seek.

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