US Administration recently imposed a big Visa Fee on Indian IT companies to fund a Border Security Program.The Senators responsible for writing the legislation were explicit about targeting Indian companies referring them derogatorily as “Chop Shops”.Note Indian Companies send a lot of workers on visas to the US to work on Client Sites.This has been made a bogey by Democratic Lawmakers who say that these take away US jobs.This is despite the fact that cost savings accrue to US businesses making them more competitive with other global companies.Infosys also employs 1300 workers in the US making these arguments of chop shops a bit silly.However with Senate Elections in November,President Obama has signed the bill into Law Despite protests by the Indian government.Note Indo-US relations have been on an upward trajectory since the signing of the Nuclear Agreement between the 2 countries.However this incident might throw a big spanner in the works

Should India Retaliate and if so How

India has been restrained in this matter only commenting on taking the US to the WTO for discrimination and writing a letter to the US Trade Representative.However this has not elicited much of a response from the US administration.India should not be seen soft in this dispute as a surrender in this issue would invite more such acts by foreign countries.Note India is the 2nd faster growing economy in the world  and presents a lucrative market for US MNCs facing a slowing domestic economy.Also unlike China,India does not have a deficit-surplus issue with the US.India is a crucial market for US which wants to double exports in the next 5 years.India can put punitive duties on imports of aircraft products.Note US exported more than $2 billion in airplane and space parts from the US in 2009 and is expected to grow this strongly in 2010 as well.India can easily replace Boeing with European manufacturer Airbus.India will be the biggest aircraft market in the world in the next 5-6 years as air traffic explodes.Airbus and Boeing are fierce rivals with their disputes frequently putting EU and the US government in WTO disputes.

India may drag US to WTO over visa fee hike issue – HT

India “cannot keep quiet” on an issue that hurts its commercial interests, Rahul Khullar, the top bureaucrat in the commerce ministry, said in New Delhi.The visa fee hike “is WTO incompatible,” Khullar said, adding the government was now deciding its “next course of action” which could include challenging the US legislation before the World Trade Organisation.

The 600-million-dollar measure, signed into law last Friday by US President Barack Obama, will nearly double visa fees for some Indian information technology workers entering the United States.The National Association of Software and Services Companies (NASSCOM), which represents India’s top software exporters, has said the measure will boost annual US visa costs for the sector by 200-250 million dollars annually.