Uncertainty regarding visas and AI in Indian IT sector following Democrat victory in America

Following the US midterm election results, uncertainty regarding visa policies for Indian IT (IT) companies is likely to continue. According to a BusinessLine report, the Democrat victory is unlikely to bring a major change in the technology cost cycle or significant relief in immigration-related challenges. However, these election results could bring more regulatory oversight on Artificial Intelligence (AI) investments and stricter oversight on visa policies.

In the US midterm elections, Democrats have now gained control of both houses by crossing the majority mark of 218 seats in the House of Representatives and securing a majority in the Senate. Despite this change in power, Donald Trump remains President, so his executive authority over key policy areas such as trade and immigration will be maintained.

Experts believe that since Democrats have a regulatory approach, AI data center bills may face strict regulatory scrutiny. Nitin Kumar, founder of Florida-based fashion tech company 'The F* Word', stated that if capital expenditure (capex) is reduced in this sector, companies will have to prioritize profitability. Consequently, work related to training AI and frontier models may quickly shift to regions such as Eastern Europe, India, and Latin America. As America is a capitalist economy, widespread investment in AI will continue, but issues like ESG, which were previously lagging, may come back into discussion.

Nitin Kumar further added that IT outsourcing will continue, and a general increase may be seen in cost-sensitive tasks. AI capabilities are evolving extremely rapidly, with models improving in a few weeks and costs continuously decreasing. This situation will create uncertainty until technology and its economics stabilize. Under Democrat leadership, rules will focus on issues such as security, privacy, fairness, and transparency, as the nature of AI is uncertain.

According to Gaurav Vasu, CEO and founder of UnearthInsight, enterprise technology spending is already shifting towards AI applications, AI-native platforms, and intelligent automation. Fundamental business reasons such as productivity, efficiency, and competitiveness are responsible for this shift. Political changes will not change these fundamental driving forces, but policies under Democrat leadership could slow down the pace of investment in AI infrastructure and data centers or bring strict rules. However, it remains to be seen whether this will cause any significant change in enterprise technology spending and the demand for IT services.

The influence of the US public sector on the Indian IT sector is limited, as the share of government contracts in their total business is only 1 to 2 percent. Therefore, there is little possibility of any change in public sector spending after the election having a direct impact on this industry.

Talking about the H-1B visa program, Nitin Kumar stated that this program was designed to serve the interests of the US economy rather than the interests of India or Brazil. Previously, there was a shortage of skilled talent in the US, but the required skills in the next 10 years will be different from the last decade. However, some important gaps will still be filled by outsiders, but high-end hiring will happen locally.

Ritika Gupta, CEO of Aaera and a global education mentor, added that immigration policy is influenced by various factors such as presidential orders, legislative initiatives, Homeland Department approvals, and USCIS procedures. Even if the political landscape changes, there will not be immediate changes in immigration laws. The defeat of the Republican party could increase Congressional scrutiny of the administration's immigration policies, which could make the visa program more stable. However, this does not mean that access to H-1B will become easier for Indian applicants. The debate will continue on whether companies use this program to address skill shortages or to reduce labor costs. Proposals such as high salary limits, stricter employer scrutiny, and changes in the visa selection process may emerge.

Ritika Gupta further stated that policy stability could help Indian IT companies in planning international operations, but companies will not rely excessively on H-1B visas. The IT sector has made structural shifts towards local hiring, offshore centers, and nearshore operations.

According to statistical data, H-1B employment authorizations for India's seven largest IT companies during the financial year 2025 were a total of 4,573. This figure shows a decrease of approximately 37 percent compared to 2024, and if compared with the 2015 period, this decrease is as large as 70 percent. Companies are investing in local hiring and building delivery centers in their own countries to reduce immigration costs and uncertainty.

Concluding, Nitin Kumar said that due to weakness in the US job market, the business foundation of H-1B hiring will remain questionable, as companies like Microsoft and Oracle are laying off employees. Even with Democrats gaining control of Congress in January, immigration policy may not become an immediate priority due to issues such as unemployment, job displacement by AI, the Iran conflict, and the economy. It may take until the second or third quarter for any policy changes to be implemented. Nitin Kumar further added that a change in control of Congress will not change fundamental economic and labor-market dynamics such as the demand for skilled workers and the infrastructure requirements of data centers. There may be more limitations on Trump's policy decisions, but his executive authority will be maintained.

The H-1B visa program was a program of America that allowed foreign skilled workers to work in America. The main objective of this program was to address the shortage of skills in the American economy.