Former RBI Governor Raghuram Rajan has warned that the proposed Halting International Relocation of Employment (HIRE) Act poses a bigger concern for India than the $100,000 fee increase to the H-1B visa program.
In an interview with DeKoder, Rajan said the HIRE Act could impose tariffs on outsourced services, not just goods, which would directly affect India’s IT and services exports.
“One of our biggest concerns is not so much the goods tariffs but whether they try and find ways of imposing tariffs on services. This is a threat,” he said.
Rajan added that Congress is still debating the HIRE Act. “How that will be implemented is anybody’s question, but this creeping of tariffs beyond goods to services to Indian visitors into the US through the H-1B route – these are all concerns,” he noted.
How the HIRE Act works
HIRE Act aims to encourage US job creation by making outsourcing more expensive. It proposes a 25% outsourcing tax on payments to foreign workers for services used in the US and removes tax deductions for these payments. The revenue will go into a Domestic Workforce Fund to train US workers for future jobs.
Rajan on H-1B visa fee
On the H-1B visa issue, Rajan said demand for these visas is already declining because many services can now be delivered digitally. “Indian companies can still have personnel in the US, they may recruit more from Indian students who study there. But much more can now be done virtually,” he said.
He also noted that current H-1B holders and STEM students in the US are unlikely to be affected. Companies like Microsoft may hire more people in India through global capability centers, leading to less H-1B immigration overall. “There will be adjustments, and the net effect will be less H-1B immigration, but it doesn’t look as bad as it first seemed. The HIRE Act is much more important for us,” Rajan said.
