Following the Democratic victory in the US midterm elections, Indian IT companies are navigating a tougher regulatory climate. Major firms, including TCS and Infosys, are dealing with the October 2026 suspension of the PERM labor certification program, forcing an accelerated shift toward local hiring to manage US operations.
The Democratic Party's victory in the November 2026 US midterm elections has created a more complex regulatory environment for Indian IT services providers. While the demand for digital transformation services remains steady, the immediate focus for firms is navigating a series of restrictive immigration and labor policies.
A significant concern for the industry is the suspension of the PERM labor certification program, which began in October 2026. This suspension impacts several major technology companies, including TCS, Infosys, Wipro, HCLTech, Cognizant, and Capgemini. The PERM program is a critical step in the green card application process for foreign workers. The suspension creates uncertainty for employee retention and could increase recruitment costs as firms manage their workforce requirements in the US.
The broader regulatory climate for Indian IT is also becoming more demanding. Beyond visa restrictions, a Democratic-controlled Congress is expected to prioritize tighter oversight of Artificial Intelligence. This could lead to stricter rules on data privacy, security, and the ethics of AI development. For IT firms, complying with new, potentially fragmented state and federal AI policies may require increased spending on legal and compliance teams, which could place pressure on profit margins.
Despite these challenges, Indian IT firms have been proactively reducing their dependence on H-1B visas for several years. Recent data shows that fresh registrations for these visas have fallen to a seven-year low for the current US fiscal year. To bypass visa bottlenecks, companies have moved toward a decentralized delivery model. This includes aggressive local hiring in the US and strengthening offshore delivery centers in India, Latin America, and Eastern Europe to ensure service continuity.
For investors, the key monitorable will be how effectively these companies manage operational costs while maintaining service quality. The primary business risk involves the potential for slower project execution if visa issues lead to talent shortages. Additionally, the overall stability of discretionary enterprise spending remains a factor, as clients may delay long-term technology investments until the legislative and regulatory direction of the new US Congress becomes clearer.