H-1B SHOCK AND TARIFF - SHIFTING SAND, CHANGING WORLD ORDER

 

The Crème De La Crème of India's STEM graduates would routinely be picked up by the American industry offered the H-1B visa and used to add gloss and shine to the American economy. Their average income is far more than their American counterparts but Trump and his MAGA supporters think they were cheap labour, just like the Mexican, Costa Rican and Nicaraguan immigrants working in the agricultural fields of Texas and wanted them out. Trump obliged by making the visa fee astronomical. Little did they realise that these were people with exceptional talent, the highest tax payers of their country and they did not cross the border illegally in the dead of the night.

 

By increasing the cost of H-1B visa to USD 100,000 Trump has hit India hard because 70% of 2800,000 of these visas were issued to Indian graduates last year. It is now casting a shadow on the employment prospects of these graduates, their dollar earnings and their precious remittances.

 

India has to rethink and strategize. We have to use our strengths to plan our response. The highly skilled workforce, which was educated in India was making America great for far too long is now not welcomed in America. Now, with heaps of skill and experience that they possess, will it not be a good idea to create circumstances so that they can make India great now? Their experience with digitization, AI, Cloud infra, chip design, and many other cutting edge technologies are waiting to bloom here and address our domestic problems. 

 

The fact of the matter is that globally integrated teams can now thrive in diverse locations. With fast Internet speed they can coordinate even from their home countries. So, this move may lead to offshoring of more work. 

 

H-1B has been the dynamo of American innovation but if Trump and his MAGA goons are hell bent upon pulling out the plug and stop the life support system of their big tech, what can we do? Innovators like Elon Musk, Jensen Huang, Satya Nadela and Sunder Pichai all entered the U.S. on H-1B visa and contributed so much to the American economy and soft power. Is Trump of the opinion that America would ever have been great without their contribution? Countries like the U.S. and Australia are made by immigrants and one who is an outsider today will be a tax paying, employment generating and innovating insider of tomorrow. It is the immigrants who have fire in their bellies to conquer hardships and deliver, and they are far more educated and far more productive than the average Americans. They pay higher taxes, they follow the law and they are the ones who truly make American great!

I have, in the past written a blog on how America attracts the best talents from all over the world and prospers: https://surajitbrainwaves.blogspot.com/2023/11/uncle-sam-remains-most-unique-talent.html

 

High tariff barrier

With India not prepared to surrender its sovereignty of choices when it comes to the procurement of crude oil or arms, and absolutely not ready to open its farm sector for American genetically modified produce, the battle lines are drawn and these tariffs will stay as long as Trump stays. So, our exporters will have to come out of their comfort zone and find newer markets to sell. True Americans are the biggest consumers, but the markets in the rest of the world have not yet been explored, and these places are not exactly populated by paupers.

 

The home market 

The timely reduction of GST just before the festive season is the stimulus the domestic consumer was waiting for. Income Tax revision has left some extra disposable income in their hands and revised GST has made their aspirations affordable. This is a country of 1.4 billion people with a very large neo-middle class which has recently come out of poverty. They get free ration, subsidized housing and affordable healthcare. Why are we underestimating their buying power? Why are we not targeting this market? Did you see the line outside the Mumbai Apple store to buy the new iPhone 17pro? These cost anything between INR 89,900 to 240,000 and everyone purchasing them is not exactly rolling in wealth. Banks are funding their aspirations. The same affluence and financial convenience is seen in the car, motorbike, television and white goods market and a lowered GST rates are further helping people to aspire more. Even the rural economy is looking up and tractor sales are on the rise. The FMCG (fast moving consumer goods) products are selling faster with more disposable income and lower costs. 

 

The domestic market of all our states mimics the European Union, and is only several times bigger in consumer numbers. But still trade between 27 member countries of EU far exceeds India's GDP! The intra-EU trade was 4.1 trillion € (4.8 trillion $). Germany alone exported goods worth 845 billion € to the rest of EU. So, with more money in the pocket of our consumers, why can't we build a more robust intra-states trade in this post GST era? After all, five states – Tamilnadu, Maharashtra, Karnataka, Gujarat and Uttar Pradesh aspire to become a trillion dollar economy by 2047!  Individual EU consumer may be richer that their Indian counterparts, but our numbers are far higher! India is a large country with enormous resources, a very large domestic market and our young population ensures plenty more working hands and productivity. True, our purchasing power is less and all of us cannot afford cars but the economy will improve also with the sale of toothpaste, hair oil, soap, biscuits, footwear, t-shirts, ghee, milk, vegetables, fish and poultry products. 

 

There is no dearth of jobs and the local governments have to be both aware and equipped. Pot holed roads have to be repaired, unkept parks have to be maintained, drains have to be unclothed, streets have to be kept clean, and this will not only employ people but improve the quality of our lives. We have funds like MNREGA which can be utilized for this. We have to make the best use of our manpower, create such works to improve our living standards and at the same time generate an indigenous growth spurt. We have to create jobs for all types of people so that they have a 'rozgaar' if not a 'naukri'.

 

There is a clear message that Trump is conveying to India. We have to change from a service nation to a manufacturing nation, a next generation product nation. We should invest more in R&D and teaching institutions should produce human resource which the industry needs. There is no future for unemployable degree holders, we need thinking innovators. Repetitive jobs will be done by robots and AI. 

 

Government, i.e. politicians and bureaucrats, will have to understand that we are at an important crossroad of history. We have to exploit this disaster by funding deep-tech, supporting start ups, encouraging entrepreneurs and improving our procurement policies. Manufacturing chips, rare earths, pharmaceauticals, and defense hardware and software all will require investment in R&D. 

Economic reforms alone won’t see us through this quagmire. The non-economic institutions that must support economic growth – the legal system, the judiciary, the bereaucracy remain completely unreformed. Quality legal redressal in quick time to both citizens and businesses still remain a distant dream for us. This needs to change ASAP!

Trump is not the only road block we are about to face. Europe is ready with carbon tax, their own brand of tariff. So, the sands will keep on shifting and we have to be nimble in creating, building and deploying newer technology. We cannot afford to be only consumers of technology; we have to become the creators. No one is going to give us a free way towards prosperity; we have to fight for our survival with not only plan B, but also be prepared with plans C and D for future challenges.