Former RBI Governor Raghuram Rajan has highlighted that the proposed US HIRE Act poses a greater risk to India than the recent $100,000 increase in H-1B visa fees. He warned that the legislation, currently under discussion in Congress, could threaten India’s service exports and flow of global talent. Rajan noted that while goods tariffs are concerning, tariffs on outsourced services and restrictions on H-1B visas are more significant issues.
The HIRE (Halting International Relocation of Employment) Act of 2025 aims to discourage outsourcing by imposing a 25% excise tax on payments made by US companies to foreign entities, removing deductions for such expenses. Revenue would support reskilling and workforce development in the US. Indian IT companies, which earn 70% of export revenue from the US, are expected to be most affected, alongside firms in Ireland, Israel, Poland, and the Philippines.
Rajan added that reliance on H-1B visas is declining due to virtual networks, and companies can hire locally in the US or leverage India-based operations. While H-1B fees impact is limited, the HIRE Act could disrupt outsourcing significantly, making it a larger concern for India’s industries.
