For decades, India has been obsessively focused on securing commitments for work visas in its trade negotiations, particularly when negotiating Free Trade Agreements (FTAs). This focus on work visas (referred to as Mode 4 in trade discussions) has frequently caused delays and in reaching agreements and forced India to yield substantial concessions in other areas. The current talks between India and the United Kingdom (UK) regarding an FTA are examples of this trend, as discussions surrounding mobility and visa allocations have emerged as major obstacles. However, growing evidence suggests this strategy is outdated and potentially harmful to India’s economic interests.
There are several reasons why the whole approach is outdated. Firstly, demographic decline and skill gaps in many developed economies mean that they need to import skilled workers. Indian talent is well recognised across the world as a good source. Yet, India makes substantial concessions in other sectors for access that it would likely receive anyway. This effectively translates to India subsidising human capital flight at the cost of negotiating leverage in areas that could yield substantially higher economic benefits at home.
Major developed economies already grant significant work visas to Indian professionals without FTA commitments. United States (US) H-1B visa approvals for Indians increased from 46,000 in 2021 to 166,000 in 2022, while German work visas for Indians shot up from 1,000 to 17,000 between 2020 and 2022. This surge occurred despite the absence of trade agreements, driven purely by host-country demand and demographic necessities. Meanwhile, developed nations with which India has FTAs with visa-related agreements, such as Japan and Korea, have not witnessed a significant increase in Indian workers because the market’s demand profile and language preferences are unsuitable for Indian workers.
Secondly, the shift toward digital service delivery has dramatically accelerated since the Covid-19 pandemic, making the traditional emphasis on physical presence increasingly obsolete. The International Monetary Fund and the World Trade Organization (WTO), in their 2023 report, Digital Trade for Development, found cross-border digitally delivered services to be the fastest growing segment of international trade, with a four-fold increase since 2005, outpacing goods and other services exports, to account for 54% of total services exports.
This shift isn’t restricted to technology but represents a fundamental transformation in how services are delivered globally. US trade survey data reveals that except for education services, all services are mostly imported into the US through Mode 1 (digital delivery), demonstrating that physical presence is no longer a prerequisite for service exports. Even when occasional face-to-face interaction is needed, a short-term business visa would suffice – and, in any case, the meeting could be hosted in India.
Thirdly, the political landscape in Western democracies has also shifted dramatically. Immigration has become an increasingly contentious issue, with recent elections showing growing anti-immigration sentiment. This political reality makes it harder to secure meaningful visa commitments through trade deals, and even when secured, these commitments remain vulnerable to domestic political pressures. Why force politically difficult concessions when we could get much more in other areas?
Finally, recent data reveals a striking transformation in how work visas are being utilised. India’s top seven IT companies have reduced their H-1B visa usage by 56% over the past eight years, with industry leaders like TCS and Wipro showing 75% and 69% declines, respectively. Conversely, in the same period, American technology giants substantially increased their H-1B utilisation — Amazon by 478%, Meta by 244%, and Google by 137%. This shift indicates that Indian IT companies are evolving their service delivery models, focusing more on digital delivery and local hiring. In contrast, US companies have become the primary beneficiaries of the visa programme. The current strategy of prioritising work visa commitments in FTAs essentially involves Indian negotiators advocating on behalf of Western multinationals, at the cost of significant concessions for India’s own economy.
In short, Indian trade negotiators should simply stop negotiating for long-term work visas. A more fruitful approach would be to push for concessions in goods and services trade as well as in investment frameworks. Modern service companies typically operate through a hybrid model — combining remote work from India and local offices in client countries. Trade agreements should protect this entire business model as a single unit, including securing reasonable short-term business visas. Hence, a recent Centre for WTO Studies working paper, A New Paradigm for Negotiating Services in India, makes a case for a new “Mode 5” approach for multi-modal delivery. This vastly differs from the current approach of treating digital delivery, local offices, and work visas as separate negotiation issues.
The negotiating leverage and political capital spent on securing these commitments could be better utilised in negotiating for lower tariffs and meaningful market access instead of batting for Western MNCs. As Indian IT companies demonstrate through their reduced reliance on H-1B visas, the future lies in digital service delivery and local presence, not in worker mobility. India’s negotiating strategy should evolve to reflect this reality rather than fighting yesterday’s battles over work visas.
Sanjeev Sanyal is member, and Chirag Dudani is consultant, Economic Advisory Council to the Prime Minister (EAC-PM). The views expressed are personal
