US shutdown unlikely to affect Indian IT industry

Despite the US government going in for a partial shutdown from Monday, Indian IT can breathe easy for the moment.

The IT industry generates more than 60 per cent of its revenues from the US but Indian IT companies primarily work with the private sector and not the federal government.

The shutdown began as the two houses of Congress did not consent to a new budget.

Another reason why Indian IT will not be impacted immediately is because the process of H-1B visas for the year has been completed. H-1Bs are non-immigrant visas used extensively by Indian IT companies to send engineers to the US for onshore projects.

Krishnakumar Natarajan, Chairman, NASSCOM, told Business Today that engineers would be eligible to work on these visas in the US from October 1. The application process typically begins in April. "I have also received a communication saying that Consulate Services has temporary funding available for B-1 visas. The funds can last several weeks," Natarajan said.

B-1 visas are used by business travelers on work such as contract negotiations.

Project-level resource deployment in the US, however, may get impacted. When a client project ramps down and an engineer on H-1B has to be transferred to different client, his papers need stamping by the immigration authorities. There could be delays in this process.    

Although safe for the moment, the IT industry is unsure about the long-term impact of the shutdown. What happens if the country's GDP shrinks, for instance?

Estimates by various agencies peg a 0.3-0.9 per cent cut in fourth quarter growth rates if the shutdown continues for two to three weeks.     

The S&P BSE IT index closed at 7,846.17 on Tuesday, up less than a percentage point.