Just as India-US trade talks regain traction, Trump jolts services where it could hurt India the most

The White House, in its notification, said that “abuses” of the H-1B programme present a “national security threat” by discouraging Americans from pursuing careers in science and technology, thereby risking American leadership in these fields.

“The number of foreign STEM workers in the United States has more than doubled between 2000 and 2019, increasing from 1.2 million to almost 2.5 million, while overall STEM employment has only increased 44.5 per cent during that time. Among computer and maths occupations, the foreign share of the workforce grew from 17.7 per cent in 2000 to 26.1 per cent in 2019. And the key facilitator for this influx of foreign STEM labour has been the abuse of the H-1B visa,” the White House said.

‘New wave of middle class in India under threat’

With the Trump administration beginning to impose fresh restrictions on the services sector, experts said that India’s IT industry could feel the brunt next, and this could impact the second middle-class revolution.

Head of the Delhi-based Centre for WTO Studies, Pritam Banerjee, in a seminar Friday, said that due to offshoring, middle-level jobs in the US and EU disappeared in the period from 2000 to 2010. Banerjee said that there has been a political backlash due to this, and it will cause problems in the services sector in India. “Growing up… I was born in the late ’70s… when I saw the urbanisation and development in India, the Noidas, the Gurgaons, the Punas were driven by the first round of the IT revolution. The Global Capability Centres (GCCs) are a deepening of that revolution. So our ability to drive the second middle-class revolution will depend on the extent to which we can pre-empt and deal with the huge backlash that is coming in services,” Banerjee said. “We need to pre-empt the protectionism that is coming in services, especially in Mode 1, because that’s the fastest growing component of services trade in the world,” he added.

Mode 1, within the World Trade Organization’s (WTO) framework, refers to “cross-border supply” of services, where a service is provided from one country to another without the physical presence of the service provider or the recipient in the other country
India’s services sector continues to be a significant contributor to growth, accounting for about 55 per cent of the total size of the economy in FY24, as per the Economic Survey. The US is the largest importer of India’s service sector exports.

The contribution of the services sector to overall growth has also increased significantly in the last decade, and globally, India’s services sector witnessed real growth of more than 6 per cent, with services exports constituting 4.4 per cent of the world’s commercial services exports.