The United States is considering introducing a new law that could become a major challenge for India’s IT sector. It may completely alter the long-standing and profitable relationship between US companies and the Indian IT industry. The proposal directly targets the very advantage that makes outsourcing to India attractive. Unlike regular economic ups and downs, this crisis is structural in nature. The law is called the ‘Halting International Relocation of Employment (HIRE) Act’.
Let’s understand what the HIRE Act is and how India’s IT sector could be affected if it becomes a reality.
What’s Happening?
The HIRE Act is a bill introduced by Ohio Senator Bernie Moreno. The proposed legislation is seen as a direct move against outsourcing. Under this law, from December 31, 2025, any payments made by a US company or taxpayer to foreign individuals will attract a 25% tax if the work benefits US consumers.
The purpose of this tax is to pressure companies that employ foreign workers instead of creating opportunities for the American workforce. The funds collected will go into the Domestic Workforce Fund, which will be used to strengthen apprenticeship and workforce development programmes for the middle class.
Growing US Politics Against Outsourcing
The HIRE Act stems from growing anti-outsourcing sentiment in the US, which has now escalated into a serious policy debate. It began with right-wing commentator Jack Posobiec, who called for restrictions on foreign remote workers and outsourcing. The movement gained momentum when Peter Navarro, a trade advisor to the US President, voiced his support.
Senator Moreno argues that graduates are struggling to find jobs while companies continue sending well-paying roles abroad. According to him, the time has come to ensure that the working class secures stable employment and the right to a dignified retirement.
Why is this Important for India?
The impact on India’s IT sector could be significant. More than 50 to 60% of the sector’s revenue comes from the US, and hundreds of Global Capability Centres (GCCs) provide services to American clients. In addition, a large number of start-ups and freelancers also cater to US customers. This heavy reliance is the sector’s biggest vulnerability.
If this bill is passed, offshore services will become far more expensive for US companies. For example, on a $100 outsourcing payment, not only will there be a $25 excise tax, but the expense will also no longer be deductible for income tax purposes. This means companies would need to pay roughly $21 in additional corporate tax (at a 21% rate). Altogether, excluding state-level taxes, the total burden could reach nearly 46%.
What’s in it for Investors?
After news of the proposed HIRE Act, on Monday, September 8, 2025, India’s main IT indices, Nifty IT and BSE IT, fell by about 1%, while the Nifty and Sensex remained almost flat.
Data shows that a large portion of Indian IT companies’ revenue has consistently depended on the US market.
India’s leading IT companies such as TCS, Infosys, Wipro, HCL Tech, and Tech Mahindra earn more than half their revenues from US clients. Similarly, Fortune 500 companies’ GCCs in finance, insurance, healthcare, retail, and technology rely heavily on Indian talent. In such a scenario, the 25% surcharge and loss of deductibility would significantly increase costs for US firms, potentially reducing the flow of new projects.
Although Indian IT companies are now expanding into Asia, Japan, Australia, the Nordics, and the Middle East, their biggest dependency continues to be the US.
What’s Next?
The HIRE Act poses a major threat to India’s $283 billion technology outsourcing industry, as more than 60% of its revenue comes from the US market. In 2024-25, India exported nearly $224 billion worth of IT services, highlighting how much is at stake.
If this law comes into effect, the cost of offshore IT and back-office work will rise substantially for US companies. As a result, Indian IT and BPM providers may have to rethink their US-focused delivery models.
Meanwhile, US President Donald Trump is also considering measures to discourage US companies from outsourcing to Indian firms. American activist Laura Loomer has backed this stance, stating that it is time to “Make Call Centres American Again.”
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
