U.S. HIRE Act threatens India’s $280Bn IT outsourcing sector
MUMBAI, INDIA — A recent U.S. legislative proposal, the Halting International Relocation of Employment (HIRE) Act, is sending ripples through the global outsourcing landscape.
Introduced by Republican Senator Bernie Moreno, the bill would impose a sweeping 25% excise tax on “outsourcing payments” made by U.S. firms to foreign service providers, raising alarm in India’s $250–$280 billion information technology sector, whose fortunes are closely tied to U.S.-based clients.
The proposal follows the earlier “Keep Call Centers Act of 2025,” which prohibits firms relocating call center operations overseas from obtaining federal contracts and requires disclosure when customer service functions are routed abroad.
Collectively, these legislative efforts underscore an intensifying protectionist agenda centered on reshoring U.S. employment and increasing regulatory oversight of companies with significant offshore dependencies.
Outsourcing in the crosshairs
The HIRE Act directly targets outsourcing arrangements made by American corporations. Any payment to foreign individuals for services that benefit U.S. consumers would incur a 25% tax, and critically, these payments would no longer be tax-deductible. The double hit significantly raises the cost of offshoring operations.
As a result, U.S. companies might reconsider engaging Indian IT service firms, GCCs, business process outsourcers, and remote freelance labor hit hard by the Act’s broad definition of “outsourcing payments.”
India’s leading IT exporters, including TCS, Infosys, Wipro, HCLTech, and Tech Mahindra, derive more than half of their revenues from U.S. clients. The proposed legislation threatens the core outsourcing model that has enabled cost-effective delivery, scale, and growth.
Impact on India’s IT landscape
A potential tax of 25%, combined with non-deductibility, may elevate total offshoring cost by up to 60%, undermining India’s competitive pricing edge. That could cause U.S. clients to push for price-shared burden, renegotiate contracts, or shift more work onshore, affecting margins and revenue inflows to Indian firms.
GCCs run by U.S. multinationals in India may also face scrutiny even if they operate on captive internal billing structures, as broad definitions in the Act could encompass intra-company transfers.
Analysts warn of possible job losses and weaker demand in outsourced services like application development, maintenance, customer support, and BPO. While high-value digital transformation projects might fare better, the overall picture is one of uncertainty.
Some Indian firms are already exploring diversification into markets beyond the U.S., such as Asia, Australia, the Middle East, and Europe, to reduce dependency.
The broader narrative
The HIRE Act forms a key plank in a rising tide of protectionist sentiment in U.S. politics. Voices such as former trade adviser Peter Navarro have called for tariffs even on remote foreign workers, arguing all forms of outsourcing should be penalized. Such rhetoric, once fringe, is increasingly mainstream among MAGA-aligned lawmakers.
Supporters of the bill argue that it will direct new tax revenues into a “domestic workforce fund” to support apprenticeships and domestic training programs. But critics argue the measure could backfire, raising service costs, eroding innovation linked to global delivery models, and even encouraging restructuring of U.S. firms to avoid jurisdictional exposure.
While becoming law remains uncertain, the HIRE Act has already triggered boardroom-level anxiety, stock volatility, and strategic reassessments in India’s outsourcing space. The bill highlights tensions between protectionist employment agendas in the U.S. and the deeply integrated global outsourcing economy, putting India’s outsourcing-dependent IT industry squarely in the legislative crosshairs.
