Indian IT Sector Rising Bills & US Visa Restrictions

Indian IT services companies are witnessing rising subcontracting expenses amid tighter US H-1B visa restrictions and uncertainty surrounding PERM (Permanent Labor Certification) applications, putting additional pressure on operating margins. According to UnearthInsights, average subcontracting costs across eight Indian IT firms increased to 11.3% of revenue as of September 30, compared with 10.5% a year ago. TCS reported the sharpest increase of 1.5 percentage points to 6.8%, while Wipro and Infosys recorded relatively modest increases of 0.2 percentage points. Persistent Systems also witnessed higher subcontracting costs, rising 0.3 percentage points to 15.3%. Infosys disclosed that its subcontracting expenses currently stand at 8.9%, significantly above the pre-pandemic level of approximately 6%. Its CFO, Jayesh Sanghrajka, indicated that a one-percentage-point reduction in subcontracting costs could provide 15–20 basis points of operating margin improvement. However, companies continue to depend on subcontractors to address sudden demand spikes and skill shortages despite increasing efforts to train local talent and reduce reliance on foreign workers. Overall, tighter US immigration policies, talent availability challenges and subdued revenue growth could keep subcontracting expenses elevated, creating near-term margin pressures for Indian IT companies.