Raghuram Rajan Voices Concern on HIRE Act Proposal
- He said that former RBI Governor Raghuram Rajan has termed the proposed HIRE Act in the US as a greater cause for concern than the recent increase in H-1B visa fees to $100,000. The former RBI head believed that this policy had great potential to seriously dent India's economy.
- He explained that if the HIRE Act is implemented, the U.S. may impose tariffs on outsourcing services, which would directly affect India's IT service exports. Rajan pointed out the main problem is not tariffs on goods but the possibility of tariffs on IT services. He referred to this as the biggest potential threat to India's technology sector.
- He also said that U.S. Congress is presently debating the HIRE Act, which proposes to discourage the outsourcing of services to other countries. Rajan also commented on the hike in H-1B visa fees and said those who already possess the visas and students enrolled in STEM programs are unlikely to be immediately affected.
Understanding the HIRE Act
- The HIRE Act reflects the desire of U.S. policymakers to discourage outsourcing by U.S. companies and incentivize hiring at home. It imposes a 25% tax on the compensation of employees working overseas on projects serving U.S. markets.
- This additional tax would financially burden American companies from outsourcing. They also wouldn't be able to treat the costs related to outsourcing as tax-deductible expenses.
- This revenue would be deposited into a new Domestic Human Resources Fund created in the U.S. to finance training and apprenticeship programs to enhance the skills of American workers and generate more domestic jobs.
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