India’s IT sector, long hailed as the engine powering the country’s global ambitions, has suddenly found itself at the intersection of two powerful forces: a dramatic policy shift in Washington and the relentless advance of artificial intelligence. On September 21, 2025, US President Donald Trump signed an executive order that stunned the tech world—a new $100,000 fee for every H-1B visa application, up from the previous $2,000-5,000 range. According to The Federal, this “100x jump” will first hit new petitions in fiscal year 2027 (FY27), sending shockwaves through India’s tech services landscape and forcing companies to rethink their global strategies.
The H-1B visa has, for decades, been the golden ticket for Indian engineers, programmers, and consultants to enter the US innovation economy. Now, that gateway is prohibitively expensive for all but the most valuable talent. As Economic Times explains, the new fee doesn’t apply to current visa holders already in the US, but it dramatically raises the bar for future hires. For Indian companies, the calculus has changed: sending new employees to the US now comes with a six-figure price tag per head. That’s prompted many to consider shifting projects to countries with more welcoming immigration policies, such as Canada, Britain, and Ireland.
For the most talented among current H-1B holders, the path forward may still lead to high-value US roles or relocation to other Western countries. But for mid-level workers, the picture is far bleaker. With fewer renewals and project transfers, many face the prospect of returning home. Young Indian engineers, recent US graduates, and consultants hoping for onsite US opportunities will find the funnel narrowing further. Companies will prioritize only those employees whose contributions justify the added cost—think project managers or technical leads generating millions in revenue. As Economic Times puts it, “If you bring in $2 million in project revenue, a $100,000 fee may be justified. If you are one of many interchangeable coders, your chances diminish sharply.”
This is classic economic screening: a higher price doesn’t block all buyers, but it forces them to choose carefully. The winners will be a handful of highly skilled, highly valued individuals. The losers? The broad base of mid-level staff who once filled American offices, now likely to be left behind.
Some optimists in India have argued that this fee hike could be a blessing in disguise, forcing talent to stay home and enrich the domestic economy. But as Economic Times cautions, “The idea that ‘blocked from America means staying in/returning to India’ is still wish fulfilment.” The reality is more complex. Canada, Australia, and parts of Europe are actively wooing global talent with easier pathways to residency, while Singapore and the UAE compete with tax-friendly regimes. Rather than returning home, many Indian professionals are simply choosing new destinations. Once settled in Toronto, Dubai, Sydney, or Dublin, their skills and families are no longer feeding back into the Indian system either.
Meanwhile, the impact on corporate strategy is profound. Large multinational companies are now weighing which global hubs to strengthen. Offices in Singapore and Frankfurt suddenly look more attractive for future projects. Indian outsourcing firms, too, are rethinking their delivery models. More work may be kept offshore in India, or firms may expand aggressively into other developed markets. But in each scenario, it’s the broad middle layer of Indian employees—not considered high value—who are likely to stay back.
From a purely economic perspective, what India “retains” is not necessarily its best and brightest. As Economic Times notes, “Barring those who choose not to set out, it is those who could not make the shortlist, when the price of entry rose.” The US, meanwhile, keeps the ‘priciest’ elite talent, while other countries absorb the rest of the mobile workforce, leaving India with what some call the ‘leftovers.’
But the H-1B shock is only part of the story. As The Federal reports, Indian IT is also grappling with a technology tremor from Silicon Valley: the rapid rise of artificial intelligence. Generative and agentic AI are reshaping delivery models, automating tasks like coding and testing, and reducing the need for armies of engineers stationed onsite in the US. HSBC estimates that AI will have an 8-10% deflationary impact on IT services over the next three to four years, with a 3-4% annual reduction in labor costs expected in FY26 and FY27.
For some vendors, the combination of visa restrictions and AI-driven automation could actually improve profit margins. As Motilal Oswal explained, “If new H-1Bs vanish, on-site revenues will decline, but so do on-site costs. This shift could improve operating margins, as offshore work tends to be structurally more profitable.” The net effect on earnings per share could be neutral, although top-line growth may slow.
Industry insiders expect a wave of changes: offshore delivery will rise, on-site staffing will shrink, and vendors will expand nearshore hubs in Canada and Mexico. Contract structures may shift from hourly billing to fixed-price models, increasing margins but transferring more risk to vendors. As one senior Mumbai-based analyst told The Federal, “The common narrative of ‘H-1B fee = India IT loses’ missed the point. For some firms, this could be the perfect excuse to finally restructure and push offshore delivery.”
The sector is also likely to see a bifurcation of skills. Strategic roles like product owners, architects, or compliance managers will increasingly be reshored to US hires, commanding higher wages but fewer slots. Meanwhile, the bulk of engineering work will flow offshore, aided by automation. For Indian engineers, more work may come home, but much of it will be commoditized, with billable hours undercut by technology. As a Bengaluru-based CTO told The Federal, “Meanwhile, the bulk of engineering work will flow offshore, aided by automation.”
Despite the turbulence, there are reasons for resilience. Franklin Templeton reminds investors that India’s IT sector remains a $282 billion powerhouse, contributing 7.3% of GDP, with exports growing 12.5% in FY25. HSBC adds that as companies migrate to multi-agent systems, “enterprise software architectures and infrastructure may need redesign, which is more work for Indian IT.”
Still, the risks are real. The long-term innovation ecosystem in India could be threatened if the pipeline of professionals gaining exposure in the US tech industry dries up. As Economic Times warns, “Without that exposure and global integration, India risks being sidelined from networks that have propelled its rise in the digital age.”
Since Trump’s H-1B bombshell, businesses have scrambled and employees have panicked. The unpredictability of US immigration policy has made companies even more cautious about relying on the US for stable solutions. As the global chessboard shifts again, India must adapt. Policymakers are urged to strengthen the domestic talent ecosystem, improve infrastructure, raise the quality of life, and create stronger opportunities for innovation at home. Competing for talent is now a global game, and the stakes have never been higher.
The convergence of a six-figure visa fee and AI’s relentless advance is forcing Indian IT to evolve—quickly. The sector has reinvented itself before, from Y2K to the SaaS revolution to the pandemic’s remote pivot. This time, though, reinvention is not just an option; it’s the price of survival.
