$282 Bn IT Industry In US Right Wing's Cross Hairs

The US remains the largest market for IT outsourcing, and for Indian giants TCS, Infosys and Wipro, it contributes around 40 per cent of their top line.

IMAGE: US President Donald J Trump speaks at a dinner he hosted for Republican senators at Mar-a-Lago in Palm Beach, Florida, February 7, 2025. Photograph: Kevin Lamarque/Reuters

The worst fears of India's information technology services industry could be edging closer to reality, as Far-Right US activists claim that President Donald Trump is looking to block American companies from outsourcing technology work to Indian firms.

The timing could not be worse. Indian IT companies are already grappling with low single-digit growth for a second consecutive year, battered by a weak global economic backdrop and the fallout from tariffs that have drained momentum from manufacturing and retail sectors.

"The recent visa and immigration comments directed towards the country and to the IT industry in general was not a big concern for us, as the industry has moved on from visas, there is a lot of local hiring done," said a senior executive at a leading IT firm, speaking on condition of anonymity.

"The fear was what if US companies are asked to reduce work with Indian firms," the executive added.

The US remains the largest market for IT outsourcing, and for Indian giants such as TCS, Infosys, and Wipro, it contributes around 40 per cent of their top line.

"For the industry this is a wait-and-watch time. The industry does not want to comment on these issues," an industry veteran said.

"On the taxation issue, how do they plan to tax will not be easy... How do they intend to do it," the veteran asked.

Analysts agree that implementing taxation on services would be extremely difficult.

Peter Bendor-Samuel, founder and executive chairman of Everest group, said: "We've looked at this extensively and held numerous conversations with well-connected sources in Washington. The chances of the Trump administration successfully imposing meaningful tariffs on services are extremely slim."

"There's no doubt they would like to, but it's very hard to execute, which is why their focus has remained on physical goods."

The net effect is largely political posturing, Bendor-Samuel added, with little need for serious industry planning.

"The relationship between the two countries has undoubtedly deteriorated, and the administration is clearly seeking further leverage over India. But taxing service providers is unlikely to be the solution.

"Instead, they've zeroed in on tightening Indian immigration rules -- H1-B and B visas.

"Even that is a complex challenge, and at best, would have only a modest impact on the profitability of Indian service firms."

Laura Loomer, a staunch Trump supporter, fanned the flames on social media.

She posted on X that Trump was 'now considering blocking US IT companies from outsourcing their work to Indian companies.'

'In other words, you don't need to press 2 for English anymore. Make Call Centers American Again!', Loomer declared

'I am so excited for President Trump to end the days of pressing 2 for English to speak with someone who doesn't speak English.'

The $282 billion Indian IT industry, which has been a key pillar of the country's exports for over three decades, finds itself in the crosshairs of the US right wing's growing opposition to H-1B visas.

Critics argue that Indian tech workers, brought into the US by outsourcing firms, are displacing American workers and weakening the economy.

Recently, conservative commentator Jack Posobiec called for imposing tariffs on foreign remote workers, drawing a nod of approval from Trump's trade adviser, Peter Navarro.

Any such policy shift would strike at the heart of India's IT and BPO industry, potentially triggering an unprecedented crisis.

Thousands of jobs could be lost, and the industry's deep dependence on the US market would leave it particularly exposed.

Saurabh Gupta, president of research and advisory at HfS Research, pointed out the stark difference from past downturns.

"Unlike past downturns driven by economic cycles, this crisis is man-made, with repercussions not only for Indian IT providers but also for US clients that are already struggling with rising costs from tariffs."

"Any restrictions on the outsourcing and broader IT services would squeeze both supply and demand sides, making delivery more expensive and less predictable.

"This all creates a burning platform for accelerating the shift toward services as software," said Gupta.

Yugal Joshi, partner at the Everest group, cautioned that nothing is off the table for the US government.

It's hard to tariff technology services, but the government can devise other creative ways that can trouble the industry, Joshi explained.

"US clients do not have too many options but to adopt a global delivery model, including GCCs.

"Such tariffs will impact everyone and not only just Indian heritage IT services firms.

"If this is adopted in any shape and form, other countries will retaliate, and all cloud and technology vendors will be tariffed by these countries because most of these are US companies."

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