PUNE: The US presidential election in 2020 is unlikely to impact IT services deal flows, according to a new report by JM Financial.

There has been minimal buzz on outsourcing as an election issue this time, unlike the previous two elections which had resulted in a marked slowdown in the year-on-year dollar revenue growth for Indian IT companies, it said.

Pankaj Kapoor and Vishnu KG, analysts at JM Financial, said the number of proposed legislations on immigration/outsourcing in the US Congress in CY19 was half of that in CY16.

Most of the proposals remain at the first stage (introduced to the House/ Senate and referred to a committee), implying a likely lower relevance of job-loss/immigration as an election issue in 2020 vs. 2016. With unemployment rates in the US IT industry being at a 20-year low, job losses would not be a relevant election issue this time around.

“Unemployment rate in the IT industry in the US at 1.6% in Nov-19 is a 20-years low (=few disgruntled/displaced workers). Not surprisingly, H-1B visa rejection rate appears to be moderating; the initial denial rate was down to 15.2% in 4QFY19 (Oct year-end) vs. the peak of 17.4% in 1QFY19,” they said in the report.

Additionally, Indian IT companies have stepped up local hiring in the US and have been adding local development capacities to accommodate rebadged headcount.

The report also said that they expect no incremental deterioration in demand dynamics across verticals in CY20, with revenue to growth to remain stable or improve in FY21.

Supply-side pressures are unlikely to continue in FY21 given minimal constraints on input cost like campus salaries alongside a realignment of project staffing mix and involuntary mid-management attrition. Most companies have ramped up their onsite presence which would also result in subcontracting costs stabilizing.

“We expect IT spend in BFS and Retail to stay opportunistic; there should be stability in Manufacturing as the impact of global trade conflicts moderates and 5G-linked spend should pick-up in Telecom,” they said.

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