The United States has recently intensified its protectionist policies targeting global trade and immigration. The proposed Halting International Relocation of Employment (HIRE) Act 2025 aims to discourage outsourcing by imposing heavy taxes on foreign service providers. This legislation could reshape India’s IT exports and restrict opportunities for Indian students in US STEM fields.
What is the HIRE Act 2025?
The HIRE Act, introduced in the US Senate, proposes:
- A 25% excise tax on payments made to foreign service providers.
- A ban on tax deductions for such expenses.
- A possible 50% duty on imported hardware.
These measures could increase the effective cost of offshored IT services by nearly 60% after taxes, making outsourcing to India less attractive for American companies.
Implications for the Indian IT Industry
India’s IT sector generates over 60% of its revenues from exports to the US. The HIRE Act directly threatens this model by making outsourcing costlier.
- Large firms may absorb some of the impact due to long-term contracts.
- Small and mid-sized IT companies could face survival challenges.
- US firms might increase onshore hiring, but this comes with higher costs, expertise gaps, and operational risks.
Outsourcing remains 20–40% cheaper than onshore services, so while immediate disruptions are likely, long-term economic logic still favours hybrid outsourcing models.
Impact on Indian Students in the US
The broad definition of “foreign person” under the Act could affect international students, including F-1 visa holders under the OPT (Optional Practical Training) scheme.
- Wages paid to foreign students could face higher taxes.
- This may reduce job opportunities for Indian students in STEM fields.
- Career prospects in areas like AI, cybersecurity, and semiconductor design could narrow despite high US demand.
US STEM Talent Shortage vs. Protectionism
The US faces a critical shortage of STEM graduates, particularly in emerging fields such as:
- Artificial Intelligence (AI)
- Cybersecurity
- Semiconductor design
Indian graduates from US institutions are a key part of the tech workforce. Restricting them could hurt US innovation while limiting opportunities for Indian talent.
Strategic Response for India
To safeguard its workforce and IT exports, India must:
- Diversify student destinations to Germany, Canada, Australia, and other countries.
- Invest in deep technologies such as AI, biotechnology, and advanced R&D.
- Support IT firms in developing resilient global business models less dependent on US outsourcing.
Future Outlook
Although the HIRE Act 2025 may face resistance from US corporate lobbyists, the current climate of protectionism increases its chances of approval. The potential risks to India’s IT industry and Indian students abroad are significant, demanding proactive strategies from policymakers and industry leaders.