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Amid a US$100,000 H-1B fee and shifting talent flows, India is moving from services dependence toward capability building—retooling human capital, delivery models, and partnerships for innovation at scale.
The contemporary global economy stands at a pivotal juncture where talent mobility has become a defining determinant of national competitiveness. US President Donald Trump’s imposition of a US$100,000 selection fee on H-1B visas is more than a policy adjustment; it signals a structural shift in how nations compete for human capital in the digital age. From a macroeconomic perspective, the measure risks underestimating the contribution of skilled migration to growth in interconnected economies. With India-born professionals accounting for roughly 71 percent of H-1B beneficiaries, and median compensation rising from US$108,000 (FY2021) to US$118,000 (FY2022–FY2023), these workers typically fill specialised, complementary roles rather than substituting domestic talent.
Economic theory is clear that constraining factor mobility can misallocate human capital and lower aggregate productivity; however, the distribution of near-term costs for India deserves attention. A pay-to-play filter favours incumbents over start-ups, raising the risk that Indian founders face slower access to US customer discovery, venture networks, and enterprise sales learning. Tacit knowledge that historically diffused through on-site stints—such as product-management norms, compliance practices, and client embeddedness—may accumulate more slowly if fewer teams sit with customers. Firms could experience redeployment and bench costs, temporary margin pressure during contract renegotiations, and additional legal/compliance overhead while exploring alternative pathways.
A pay-to-play filter favours incumbents over start-ups, raising the risk that Indian founders lose early access to US customer discovery and venture networks.
Domestically, absorbing more returning or retained talent can tighten urban infrastructure and managerial bandwidth, potentially compressing salaries in some segments before new demand absorbs the supply. These are transitional but material frictions; they call for tighter programme management, faster skilling upgrades, and active support for market access. Set against these adjustments, the case for India’s strategic pivot—from dependence to capability—rests on converting short-run disruption into durable advantage and provides a natural bridge to self-reliance and innovation at scale.
This policy shift unfolds alongside India’s digital economy transformation—projected to contribute around US$1 trillion to the GDP in the mid-2020s—driven by robust technological infrastructure and a rapidly expanding base of digitally skilled professionals. Prime Minister Narendra Modi’s assertion that dependence on other countries is India’s “real enemy” and his call for “Atmanirbharta” (self-reliance) signal a deliberate re-orientation of development strategy.
Indian IT services companies, which derive 50–60 percent of their revenues from the US, are already adapting. Major firms, such as Tata Consultancy Services, Infosys, and Wipro, have reduced their dependence on H-1B visas in recent years, relying more on offshore delivery, local hiring, and global capability centres (GCCs). This positions them to capture larger shares of the technology value chain as American clients seek cost-effective alternatives to on-site deployments. The implications extend beyond individual firms to India’s innovation system. The start-up landscape has expanded rapidly, with over 100 unicorns in recent years, and cities like Bengaluru, Hyderabad, and Pune continue to deepen their roles as technology hubs, attracting investment and fostering indigenous innovation.
India’s educational infrastructure provides the foundation for this trajectory. The country produces millions of STEM graduates annually, a deep pipeline by global standards. Government initiatives such as the Production Linked Incentive (PLI) scheme for semiconductors are creating frameworks for advanced technological development within India’s borders. Research and development (R&D) spending has grown significantly since 2020, with domestic firms and international corporations establishing major innovation centres. Companies, including Google, Microsoft, and Amazon, are investing billions in Indian engineering and R&D, recognising the Indian market as a source of innovation rather than merely a destination for outsourced services.
These are transitional but material frictions; they call for tighter programme management, faster skilling upgrades, and active support for market access.
As this base deepens, the ongoing rebalancing away from US on-site roles can also improve how India matches skills with demand at home. As global capability centres and product firms scale domestically, they reveal granular needs—specific stacks, compliance requirements, and domain expertise—earlier and more clearly. Universities and training providers can adjust their curricula more quickly, hiring cycles can be shortened, and relocation/visa frictions can be decreased. Niche capabilities in chip design, cloud security, data engineering, and product management find buyers without waiting for overseas assignment windows. Wage signals normalise across cities and firm tiers, retention improves, and apprenticeships and industry certifications connect more directly to live roles. These gains depend on better labour-market data, portable credentials, and policies that support interstate mobility.
As the US adopts more protectionist measures, other destinations are competing more actively for global talent—Canada’s Express Entry categories, the UK’s Global Talent Visa, and Australia’s skilled migration reforms are prominent examples. For India, these developments open space for diversified partnerships—the country is deepening technological cooperation with European partners and engaging selectively in other regional and supply-chain frameworks, thereby reducing its overreliance on the US markets.
The transformation of global labour markets is one of the salient economic shifts of the early twenty-first century. “Reverse brain drain” is increasingly visible as domestic ecosystems mature to retain and attract top talent. The return of Indian professionals to establish start-ups in Bengaluru, as well as the rise of India-based unicorns competing globally, illustrates this change. The digital nature of modern work further enables cross-border collaboration that bypasses traditional immigration constraints. Indian firms can now serve global clients at scale while keeping their core teams in India, capturing value that once required a physical presence in client countries.
Durable prosperity will hinge on building independent capabilities and resilient human-capital systems, not on access to foreign labour markets alone.
The economic literature on skilled migration consistently shows that restrictions on high-skilled labour mobility tend to harm receiving economies in the long run, while source countries may benefit if they effectively absorb and deploy retained talent. Historical examples from South Korea, Taiwan, and Israel demonstrate how domestic innovation capacity can be accelerated when human capital remains local and institutions effectively bridge research with market applications. India’s own experience follows a similar trajectory. The software industry has evolved from cost-efficient service delivery to a sophisticated innovation ecosystem, driving global advancements in fintech, health tech, and agri-tech. Firms such as Flipkart, Paytm, and Ola have developed business models suited to Indian conditions that are now exported internationally. Going forward, the durability of this trajectory will depend on sustained investment in education quality, research infrastructure, and institutional mechanisms that foster innovation.
Finally, Trump’s restrictive H-1B fee risks dulling US innovation by taxing high-skill mobility, while nudging talent, investment, and ideas toward competitors. India can convert this disruption into an advantage by deepening self-reliance, strengthening domestic innovation capacity, and expanding external partnerships. Durable prosperity will hinge on building independent capabilities and resilient human-capital systems, not on access to foreign labour markets alone. A migration realignment is underway that shifts where teams form and intellectual property is created, potentially accelerating India’s move from services dependence to innovation leadership. Those that adapt fastest to this human-capital competition are likely to define tomorrow’s global economy.
Soumya Bhowmick is a Fellow and Lead, World Economies and Sustainability at the Centre for New Economic Diplomacy (CNED) at the Observer Research Foundation.
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Soumya Bhowmick is a Fellow and Lead, World Economies and Sustainability at the Centre for New Economic Diplomacy (CNED) at Observer Research Foundation (ORF). He ...
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