Former RBI Governor Raghuram Rajan warns that the proposed US HIRE Act could severely impact India’s $225 billion service exports and global talent pipeline.
TheInterviewTimes.com | New Delhi | November3, 2025 — Former Reserve Bank of India (RBI) Governor Raghuram Rajan has issued a stark warning to New Delhi about the potentially devastating consequences of the US HIRE Act, describing it as a far greater threat to India’s economy than the recent $100,000 hike in the H-1B visa fee.
While the visa fee increase may cause temporary strain for Indian IT companies, Rajan emphasized that the US HIRE Act—if enacted—could have lasting repercussions for India’s global services exports and talent flow.
What Is the US HIRE Act and Why It Matters
In his interview with DeKoder, Rajan explained that the US HIRE Act currently under discussion in the US Congress proposes a 25% excise tax on outsourcing payments made by American firms for services benefiting US consumers.
It also seeks to disallow tax deductions on such payments. The measure is designed to promote job creation within the US by discouraging companies from outsourcing to countries like India.
However, according to Rajan, this protectionist legislation could cripple India’s $225 billion IT and business process outsourcing (BPO) sectors, which depend heavily on American contracts. The US HIRE Act, he noted, is not just about trade adjustments but a structural challenge to India’s service-led export growth model.
Tariffs on Services: A New Kind of Economic Threat
Rajan highlighted that India already faces record-high tariffs on goods entering the US—up to 50%, higher even than China’s 47%. These have hit industries such as textiles and manufacturing. The real danger, however, lies in extending such tariffs to services, a move that could destabilize one of India’s strongest export segments.
“One of our biggest concerns is not so much the goods tariffs but if they try and find ways of imposing tariffs on services. This is a threat,” Rajan said.
If implemented, the US HIRE Act could trigger a slowdown in the outsourcing market and potentially force companies to localize operations in the US, diminishing India’s role in the global technology and back-office ecosystem.
Impact on Indian Professionals and Global Talent Mobility
While the US HIRE Act could also affect Indian professionals entering the US through H-1B visas, Rajan considers this a secondary issue compared to the broader service tariff challenge. He noted that with remote work becoming the norm, the physical movement of talent is less critical than before.
Many multinational firms are adapting by expanding India-based Global Capability Centers (GCCs) and hiring Indian professionals already residing in the US. Yet, Rajan cautioned that the US HIRE Act could still restrict opportunities for future talent mobility and disrupt the global balance of skilled labor.
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Call for India to Act on Trade Negotiations
Rajan urged the Indian government to engage in urgent trade negotiations with Washington to secure tariff reductions and safeguard key industries. He suggested reducing tariffs to the 10–20% range, particularly for labor-intensive exports and service contracts.
Recent trade data indicate that India’s exports to the US—ranging from smartphones to pharmaceuticals—are already declining under the current tariff environment. If left unaddressed, the US HIRE Act could exacerbate these losses and permanently alter supply chains.
The Bigger Picture: Safeguarding India’s Service-Led Economy
Rajan’s warning serves as a timely reminder that the US HIRE Act poses not just a policy challenge but a structural threat to India’s service economy. The Act’s proposed tariffs on outsourcing could weaken India’s competitiveness, shrink employment opportunities, and disrupt a trade relationship that has long supported growth in technology and innovation.
In conclusion, while the H-1B visa fee hike is a short-term concern, the US HIRE Act represents a far more serious and enduring risk to India’s $225 billion services sector, demanding immediate diplomatic and policy intervention.