Two noted US economic experts have warned that the new US law steeply hiking visa fees could sour US relations with India and send wrong signals about US attitudes to open global markets.

"Regrettably, what might be good politics is bad policy for America," wrote Jacob F. Kirkegaard and Arvind Subramanian, senior fellows at the Peterson Institute for International Economics, in Foreign Policy magazine about the law to hike visa fees to raise $600 million to help secure the US-Mexico border.

"It is unlikely to raise revenue, will inflict damage to American competitiveness, sour US relations with India, and above all send the wrong signals about US attitudes to open global markets," they say noting that the Congress's budget neutrality numbers simply don't add up.

"Without explicitly saying so, the law clearly targets India, home of the world's fastest growing IT services companies," the experts wrote noting Indians received about half of all H-1B and L-1 visas in 2009, and comprise most of the roughly 50 per cent of all H-1B and L-1 recipients who work in computer-related occupations in the US.

"Despite US President Barack Obama's endless declarations that the US-India 'strategic partnership will continue to grow', this is a direct snub to India's most powerful domestic advocates of economic liberalisation," Kirkegaard and Subramanian wrote.

"The Obama administration should tread carefully. If India shifts its economic orientation away from the United States, the costs would far outweigh any of the political benefits or fiscal revenue from this visa fee policy," they wrote.

"India could choose to retaliate by buying more Airbus planes from Europe, importing more cars from Japan, or moving toward a trade agreement with the European Union that discriminates against US exporters," the experts warned.

"So when Obama lands in New Delhi on his upcoming trip this fall, he could find himself in the middle of an ugly trade skirmish with a rising Asian superpower."

The new law calls for fees for the H-1B and L-1 immigrant visas to increase by $2,000 and $2,250 respectively for companies with 50 or more employees in the US - if more than half of the company's employees are on H-1B or L-1 visas.

This provision effectively doubles the existing total government fees for the affected companies, predominantly Indian IT services firms. The government's annual revenues are expected to rise to roughly $135 million, based on about 65,000 H-1B and L-1 visas issued annually.

"In anti-immigration fantasy land, where the US labour market is perceived to be overrun by hundreds of thousands of cheap, high-skilled Indian workers, such a fee might seem like a plausible cash cow," Kirkegaard and Subramanian wrote. "But the real world of the US labour market in 2010 looks very different."

Demand for high-skilled visas is extremely volatile, rising dramatically in times of high growth and slumping during recessions, they said.

According to their calculations, based on data for fiscal year 2009, the actual demand for high-skilled H-1B and L-1 visas in a relatively sluggish economy will be about 20,000 visas, which is far below the target of 65,000.