By Mudit Dube

Copyright newsbytesapp

US President Donald Trump’s administration has introduced a new bill, the Halting International Relocation of Employment (HIRE) Act, which could have major implications for India’s $250 billion IT services industry. The legislation was introduced in the US Senate earlier this month by Republican Senator Bernie Moreno of Ohio. It seeks to impose heavy penalties on American companies that outsource jobs overseas, with an aim to bring jobs back to America and reduce reliance on foreign labor. The HIRE bill proposes a 25% tax on outsourcing payments, which are defined as any money paid by a US company or taxpayer to a foreign entity or individual whose services ultimately benefit consumers in the US. It also prohibits companies from deducting outsourcing expenses from their taxable income. The revenue generated from this tax would go to the Domestic Workforce Fund, which would finance apprenticeships, worker retraining initiatives, and workforce development programs aimed at strengthening the US labor pool. The HIRE bill has raised alarm bells in the Indian tech sector, which heavily relies on US clients for revenue. Major Indian IT firms such as Tata Consultancy Services (TCS), Infosys, Wipro, HCLTech, and Tech Mahindra derive 50-65% of their total revenue from North American clients. These companies provide a wide range of services from software development to business process outsourcing (BPO). The potential introduction of a 25% outsourcing tax and the inability to deduct outsourcing costs could dramatically increase expenses for US firms relying on Indian partners. This could force these companies to either scale back their offshore operations or pass on the additional costs to consumers. Even Global Capability Centers (GCCs) set up by multinational corporations in India could see their operations disrupted due to this proposed legislation. The introduction of the HIRE Act comes at a difficult moment for the Indian technology sector, which is already grappling with pricing pressures, slower discretionary spending due to economic uncertainty, AI disruption, and muted hiring. Many analysts believe that the bill will face major hurdles before it becomes law. US companies relying on offshore talent are expected to lobby against this bill arguing that domestic hiring cannot fully replace the scale, skills, and cost-effectiveness offered by countries like India.