Former Reserve Bank of India Governor Raghuram Rajan has voiced concern that the proposed US Halting International Relocation of Employment (HIRE) Act could harm India’s economy more significantly than the $100,000 increase in H-1B visa fees. Speaking to DeKoder, Rajan said the act, if passed, could extend tariffs beyond goods to include outsourced services—posing a direct challenge to India’s technology and service exports to the United States.
He explained that the HIRE Act aims to promote domestic job creation by discouraging American companies from offshoring work. The proposal would impose a 25% outsourcing tax on payments made to foreign workers for services used within the US, making it more expensive for firms to send jobs abroad. Additionally, such payments would no longer qualify as tax-deductible, with the revenue redirected into a Domestic Workforce Fund to train and upskill American workers.
Rajan cautioned that this move represents a new form of trade protectionism. “The real concern isn’t about tariffs on goods anymore—it’s about tariffs creeping into the services sector,” he said. The potential extension of these measures to services and even Indian professionals in the US through the H-1B route, he noted, could disrupt the balance of economic engagement between the two nations.
On the H-1B visa issue, Rajan was more optimistic. He observed that the need for such visas has been declining as companies increasingly rely on digital delivery models. Indian firms are now managing backend operations from India while hiring locally in the US for client-facing roles. He added that current H-1B holders and Indian students pursuing STEM degrees in the US are unlikely to face major disruptions.
Highlighting a possible silver lining, Rajan said global corporations may strengthen their India-based operations instead. “Companies like Microsoft might expand their global capability centers in India rather than rely on H-1B hires,” he remarked.
However, Rajan urged policymakers to act swiftly to mitigate potential supply chain disruptions from rising US tariffs, especially in labor-intensive sectors such as textiles. “We must ensure our recent progress in accessing the US market is not rolled back,” he warned.
