Former Reserve Bank of India Governor Raghuram Rajan has warned that the US's proposed HIRE (Halting International Relocation of Employment) Act presents a greater threat to India’s economy than the recent steep hike in H-1B visa fees. According to Rajan, the HIRE Act, which aims to impose a 25% outsourcing tax on payments made to foreign workers for services used within the US, could severely impact India’s IT and services exports, disrupting long-established supply chains and threatening job opportunities.

According to DeKoder, Rajan expressed concerns that the US Congress is debating legislation that might extend tariffs beyond goods to services, including payments related to Indian workers entering the US via the H-1B visa route. The Act seeks to encourage domestic employment by discouraging outsourcing, with funds raised from the tax going into a Domestic Workforce Fund to support American skill development. Rajan highlighted that while the $100,000 H-1B visa fee hike might cause short-term issues, the long-term consequences of the HIRE Act could be much more damaging for India's service sectors, particularly IT.

Rajan also noted that the demand for H-1B visas has already been declining with the rise of digital service delivery from India, and large corporations might hire more personnel directly in India within their global capability centres than on US soil. This shift could reduce H-1B immigration but increase India-based operations. However, the looming threat of tariffs on outsourced services needs urgent attention to prevent permanent disruptions to India’s export-driven sectors, including labour-intensive industries like textiles.