US HIRE Bill 2025: Why Did Ex-RBI Governor Raghuram Rajan Call it a Bigger Concern than the Fee Hike for H-1B Visa?

Key Points

Ex-RBI Governor Raghuram Rajan said on Friday, 31 October 2025, that the proposed US HIRE Act 2025 is a ‘bigger concern’ for India than $100,000 fee hike applied to the H-1B Visa. He explained that tariffs on services will prove more detrimental to industries than tariffs on goods.

The US Halting International Relocation of Employment (HIRE) Act 2025 is a bill proposed in the US Senate. It imposes a steep tax on payments made for outsourced labour, aiming to increase job creation in the US.

“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. There's the HIRE Act, which Congress is debating, which will try and put tariffs on outsourced services,” Rajan said. “How that'll 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.”

Rajan made the comments during an interview with DeKoder, an AI-driven election-centric reporting platform run by NDTV founders Prannoy and Radhika Roy. Addressing a question by the interviewer on the H-1B Visa, he says that the issue is not as big a threat as the HIRE Act.

According to Rajan, since remote work options have become normalised, Indian companies don’t need their employees to migrate to the US. Additionally, several clarifications made after the initial fee hike announcement have made it so that Indian industries can still find ways to employ Indians in the US.

He further went on to talk about US-China trade relations, how India can navigate high tariffs, and reforming India’s own tax structure.

See Also: Brain drain to brain gain: How India can reclaim early career scientific talent from the US

What is the US HIRE Act?

The US HIRE Act 2025 bill states that payments made to foreign entities for services available inside the US will be subject to 25% non-deductable excise tax. The stated aim is to discourage US companies from outsourcing cheap labour and to promote job creation within the country. The revenue generated from the act will be put into a Domestic Workforce Fund, which will finance apprenticeships, training and skilling programs, and other job creation initiatives.

The bill was introduced by Republican Senator Bernie Moreno from Ohio. “While college grads in America struggle to find work, 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,” Moreno said.

“It’s time to fight for working class Americans and ensure they can work and retire with dignity. If companies want to hire foreign workers instead of Americans, my bill will hit them where it hurts: their pocketbooks.”

If the bill clears the Senate, it still needs to pass the US House of Representatives and both chambers of Congress, before being approved by President Trump.

The US HIRE Bill comes after comments by US President Trump earlier in August 2025, directing tech companies to stop hiring foreign workers and create opportunities domestically. Following the H-1B Visa fee hike and steep tariffs on Indian exports, the HIRE Act is the latest US proposal to drastically impact US-India relations.

Consequences and Criticisms of the US HIRE Act

The $260 billion Indian IT industry generates around 60-70% of its revenue from services exported to the US. The HIRE Act’s 25% excise tax will impact the sector immensely, with companies likely to stop outsourcing labour to India, or passing off increased costs to consumers.

The act covers services across the IT sector, BPOs, consulting, Global Capability Centres (GCCs), and freelance services. Large companies like TCS and Infosys are likely to be less impacted than small and medium enterprises. But since to global conglomerates like Microsoft and JPMorgan Chase rely on these top firms and have setup GCCs in the country, the act is likely to have wider implications.

However, the bill has to pass several hurdles before being enacted as a law. It first needs to be passed unanimously in the Senate before making it up the chain of governance. And even then, tech giants are likely to lobby against it since it has such direct impact on their expense. [Rh]

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