Opinion: Opinion | Washington's PERM Freeze Is A Warning Shot At India's Tech Model

The Trump administration on Thursday suspended five major Indian IT companies, including Infosys, Tata Consultancy Services (TCS), Cognizant, Wipro and HCL, and US IT giants Microsoft, Capgemini and Adobe, from a key US programme used by employers to sponsor skilled foreign workers for permanent residency.

The announcement marks the moment America's immigration crackdown moved from rhetoric to real gatekeeping. The operational consequence is stark: the Labour Department will not accept new or process pending PERM applications involving the companies.

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This did not come out of nowhere. A month ago, the Labour Department's Inspector General froze Cognizant's filings, and the Office of Inspector General said it was investigating alleged fraud and human trafficking involving the H-1B and PERM systems. What was then framed as a single-company probe has become a sector-wide verdict.

PERM is the foundation of the employment-based green card. An employer must provide credible evidence that no qualified US workers are available for the job, including placing a 30-day job order with the state workforce agency and advertising the posting. Without that certification, nothing else in the green card process can move.

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The administration's argument is economic nationalism dressed as fraud enforcement. US Labour Secretary Keith Sonderling said the companies had requested nearly 3 million foreign workers since 2009, arguing the practice shut Americans out of the job market. Vice President JD Vance went further against Microsoft, alleging it laid off 6,000 American workers in 2025 while receiving more than 6,000 H-1B approvals and filing 3,682 PERM applications, including nearly 1,000 for positions involving workers it had laid off.

Notably, though, the punishment has run ahead of the proof. The suspension has no published end date and no criminal charges have been brought so far. In Microsoft's and Adobe's case, nobody has said which agencies are investigating or what about. Due process, it appears, will follow the headline.

Definitely the impact will be on the tech sector. The first casualty is the individual worker. Thousands of Indian engineers who have spent years on H-1B visas, often waiting out decade-long India-specific backlogs, now find the very first rung of the ladder removed. Their H-1B status survives, but their path to permanence does not. For many, the rational choice becomes switching employers which is exactly the kind of attrition IT services firms can least afford.

The second casualty is the business model. Indian IT's US delivery has long rested on a pipeline: recruit in India, deploy on H-1B, retain through green card sponsorship. Removing the retention lever makes onsite talent costlier and more mobile. Markets have already priced the risk; after the Cognizant action alone, Indian IT stocks lost nearly Rs 55,000 crore in market capitalisation in a single session.

Third, the inclusion of Microsoft and Adobe signals this is not just an "outsourcer" problem. It tells every American tech firm that foreign hiring after domestic layoffs is now politically radioactive. The chilling effect will ripple into clients, who may prefer vendors less exposed to visa risk, accelerating the shift towards offshore delivery and AI-led automation.

Finally, the action compounds an already hostile environment. It lands as Trump extends the H-1B visa fee order while the $100,000 charge faces a court fight. The cumulative message is unmistakable: the cost of moving Indian talent to America is rising on every front.

Clearly for New Delhi, this is more than a corporate dispute. Indian nationals are the largest beneficiaries of both H-1B visas and employment-based green cards; a measure aimed at "IT outsourcing firms" disproportionately lands on Indian citizens. The optics of five of the six named services firms having Indian roots will not be lost on Indian public opinion.

On the diplomatic front also there are ramifications. It also strains a relationship that has been carefully rebuilt around technology, the very pillar that was meant to be insulated from trade frictions. Talent mobility has long been India's central ask in bilateral talks; Washington has now made it a bargaining chip. One can expect pressure on the Indian government to raise it at the highest levels, but also expect Washington to argue this is domestic labour enforcement, not foreign policy. India's challenge will be to protest firmly without appearing to defend malpractice, should any be proven.

There is a quieter long-term risk for America too. Talent denied permanence tends to go elsewhere, to Canada, Europe, the Gulf, or back home to India's global capability centres. Washington may win the headline and lose the talent. The uncertainty and sudden actions have already started the murmurs for better destinations where the techies can contribute.

The industry must take short term as well as long term steps. In the short term, they must contest the process and protect the people. The companies should seek urgent clarity, through legal channels if needed, on the basis, scope and duration of a suspension imposed without published findings or charges. Simultaneously, they must protect affected employees: transparent communication, legal support, preserving priority dates where possible, and facilitating moves to unaffected sponsors rather than letting careers stall. NASSCOM and the Indian government should press jointly for a time-bound review, since an open-ended freeze is the real damage.

On the long term, the industry must accelerate what it has talked about for a decade: substantially deeper local hiring and training in the US, near-shore delivery hubs, and AI-augmented offshore delivery that reduces the need to physically relocate staff. Alongside this, firms should submit to independent audits of their visa and wage practices and publish compliance data. A model that can withstand political scrutiny is the only one that will survive it.

Thursday's freeze may eventually be softened by courts or negotiations. But the era in which Indian IT could treat American immigration as a dependable supply chain is over. The sooner the industry builds for that reality, the less leverage Washington will hold.

(Subimal Bhattacharjee is a policy adviser on digital tech issues and the author of 'The Digital Decades: Thirty years of the Internet in India')