The US-India technology corridor, long considered mutually beneficial, is facing new headwinds. A proposed law in the US Congress, the Halting International Relocation of Employment (HIRE) Act, poses a direct challenge to the very foundation of India’s flourishing IT services sector and the rapidly expanding Global Capability Centres (GCCs). Although the legislation is still at an early stage, it represents a sharp escalation in the argument that foreign workers—especially those from India—are displacing American jobs. Unlike past rhetoric, this initiative introduces a tangible legislative weapon.
If passed, the bill will force US corporations to rethink hiring overseas. Introduced by Senator Bernie Moreno of Ohio, it aims to protect American workers by restricting outsourcing. The goal is to reduce the appeal of cheaper offshore labor, pushing US businesses to revise their global hiring strategies.
Interestingly, in July 2023, Congressman Raja Krishnamoorthi introduced a completely different bill with the same acronym — the High-Skilled Immigration Reform for Employment (HIRE) Act. Unlike the recently proposed 2025 version, Krishnamoorthi’s legislation sought to expand opportunities for global talent in the U.S. by doubling the annual H-1B visa cap from 65,000 to 130,000. The measure was designed to help American companies, particularly those in critical technology fields, attract the best professionals worldwide. In addition, it aimed to bridge the domestic skills gap by allocating more resources to improve STEM (science, technology, engineering, and math) education in U.S. elementary and secondary schools.
The HIRE Act 2025
The U.S. HIRE Act Bill 2025 seeks to discourage outsourcing. It would impose a 25% excise tax on payments by American companies to foreign entities for services benefiting U.S. consumers. “Outsourcing payments” includes fees, royalties, premiums, or service charges sent abroad. If services are used partly outside the United States, the tax applies only to the portion linked to U.S. consumers. The Bill defines a “foreign person” as any non-U.S. resident, excluding corporations or partnerships organized under U.S. territorial laws. To tighten compliance, the Treasury Secretary would have the power to mandate reporting of such transactions.
A notable provision is the disallowance of tax deductions for outsourcing expenses. This means U.S. firms cannot offset these payments against taxable income. At the same time, penalties for non-compliance would rise dramatically—from the current 0.5% per month to 50% per month, with the 25% cap removed. The legislation also contains anti-abuse measures to prevent U.S. businesses from rerouting transactions through territories to escape the levy. The revenue raised would fund apprenticeship and domestic workforce development programs, underscoring the Bill’s central goal: to penalize reliance on cheaper overseas labour and incentivize the reshoring of jobs. Senator Moreno, introducing the Bill, made the political intent explicit, stating that “globalist politicians and C-Suite executives have spent decades shipping good-paying jobs overseas in pursuit of slave wages and immense profits—those days are over.”
Although the legislation is not country-specific, the implications for India are profound. With over half of Indian IT revenues dependent on the U.S. market, along with hundreds of GCCs, startups, and freelancers delivering services remotely to American clients, the Indian technology industry stands as the most exposed sector.
Since the Bill seeks to introduce a new tax, it must first be presented in the House of Representatives before becoming law. It would then require approval from the Senate and the President’s signature. Speaking to reporters, Senator Moreno said, “We will know which Republicans support it and which ones don’t, and we’ll make the Democrats take a vote.” He also confirmed his intention to bring the Bill to the floor next week.
Currently, the World Trade Organisation (WTO) maintains a long-standing moratorium that bars member nations from imposing duties on digital services. This moratorium, which has been extended multiple times—most recently in early 2024—is scheduled for review again in March 2026. On India’s part, as part of trade understandings with the US, it had previously withdrawn the equalisation levy on digital services.
Imminent threat to India’s IT sector
India’s IT services giants — TCS, Infosys, Wipro, HCLTech, and Tech Mahindra — depend heavily on the US market, with more than half of their revenues coming from American clients. GCCs of Fortune 500 companies in sectors such as finance, healthcare, retail, and technology also rely extensively on Indian professionals to run critical global operations.
If the proposed Bill imposing a 25% surcharge on outsourced services, along with the loss of deductibility, becomes law, the cost of offshoring will rise sharply for US businesses. This leaves firms with difficult choices. Indian service providers may absorb part of the tax, squeezing already thin margins, or pass it on to clients, which could push up US service costs and fuel inflationary pressures in areas like banking, aviation, and customer support. Setting up subsidiaries in India might appear to be an alternative, but anti-abuse provisions in the legislation could limit such options. A complete halt to outsourcing is unlikely. They argue that the scale and skill depth available in India far outstrips what the US workforce can offer, making it challenging for American companies to bring large operations entirely back home.
The global environment for India’s IT sector is turning increasingly hostile. The US has stepped up tariffs, tightened immigration norms, and used sanctions as strategic tools, while other nations enforce stricter data privacy laws. For an industry that earns nearly 60% of its revenues from exports, the risks are substantial — especially for smaller firms that lack deep financial buffers. The scope of the Bill raises several sharper concerns. Its broad definition of a “foreign person” could potentially extend to wages paid to non-immigrant visa holders, including students on F1 visas under the Optional Practical Training (OPT) program. This would directly affect the career prospects of over 420,000 Indian students in US universities — many of whom pursue STEM disciplines with the hope of building careers in America.
For American enterprises, higher offshoring costs may encourage onshore hiring, creating an apparent advantage for international students graduating within the US. But if these students are also treated as “foreign persons,” their wages could be subjected to the same punitive taxes, undermining their employability. Despite the rhetoric around reshoring, economics tells a different story. Even under the HIRE Act, outsourcing to India would remain 20–40% cheaper than US-based operations. Moreover, existing long-term contracts, accumulated learning, customer relationships, and the resilience of hybrid delivery models make sudden disengagement impractical. A persistent STEM talent gap in the US further complicates reshoring ambitions, particularly in fields such as AI, cybersecurity, and semiconductor design. Indian graduates — whether from IITs or US universities — continue to provide an indispensable talent pool.
For India, the message is clear. Students must diversify their destinations beyond the US, with Germany, Canada, and Australia emerging as attractive alternatives. Meanwhile, the IT sector must accelerate its shift up the value chain, focusing on deep tech, AI, biotech, and advanced R&D to secure long-term indispensability. The HIRE Act may still falter, as similar proposals have in the past under corporate lobbying. Yet, the prevailing political climate of protectionism gives this Bill a stronger chance of advancing. For Indian IT and students alike, the risk is too real to ignore.
The HIRE Act has a tough road ahead
The bill still faces an uphill battle to become law. At present, it lacks White House backing, and even Donald Trump—despite his fiery rhetoric—has not clearly endorsed it. Past attempts, such as Senator Lindsey Graham’s call for 500% tariffs on nations purchasing Russian oil, fizzled out despite strong MAGA support. With Republicans holding only slim majorities in Congress, any measure this contentious would demand significant bipartisan compromise. There is also a possibility that the HIRE Act, in its current form, is less a genuine policy push and more a bargaining chip in ongoing U.S.-India trade negotiations. Yet, the very fact that outsourcing tariffs are being seriously tabled marks a turning point. A potent mix of political populism, nationalist sentiment, and growing anti-immigration attitudes has breathed new life into proposals once considered fringe or unrealistic. While carve-outs could emerge for strategic sectors, India’s IT exports would still face a looming threat.
A central question remains: Does the U.S. have the talent pool to substitute offshore expertise? The answer, for now, is no. American universities churn out far fewer STEM graduates than India each year, and the domestic supply of mid-to-senior-level tech professionals is thin. Outsourcing has never been just about cost savings—it ensures scale, continuity, and operational resilience. Sweeping restrictions risk undermining not only Indian jobs but also the global competitiveness of American firms.
The HIRE Act may never make it through in its current form, but it sends a strong policy signal. For Indian IT services and GCCs, the risks are no longer theoretical. Overdependence on the U.S. market has left the sector exposed to sudden policy shocks. This moment should serve as a wake-up call: diversify beyond the U.S., strengthen domestic demand, prioritize innovation, and prepare for a less welcoming geopolitical environment. Even if Representative Moreno’s bill ultimately collapses, the broader protectionist wave is gathering strength—and Indian IT is squarely in its path.
