The US has intensified tariffs, tightened immigration rules, and pursued sanctions, while other countries enforce stricter data privacy regimes. The strategic challenges for corporates and countries are plenty for building competitiveness. For the IT sector, with almost 60% of revenues coming from exports, the strategic implications are not small. Smaller IT players will be impacted severely.
The imminent threat of the Halting International Relocation of Employment (HIRE) Act, placed in the U.S. Senate is yet another tremor. Its intent is to create American jobs by discouraging outsourcing. But beneath the surface, the bill carries complex implications, not just for the Indian IT sector, but for the 420000-odd Indian students currently enrolled in U.S. universities. Many of them, particularly in STEM disciplines, aspire to build careers in America. The HIRE Act could alter their chances in ways not immediately obvious.
At its core, the HIRE Act would impose a 25% excise tax on payments made to foreign service providers and simultaneously deny tax deductions for those expenses. Analysts estimate this could raise the effective cost of offshored IT services by nearly 60%, once state and federal corporate taxes are factored in. Added to this are potential tariffs, such as a 50% duty on imported hardware that would further stretch U.S. tech budgets.
More troubling is the bill’s scope. The definition of “foreign person” is drafted broadly enough that it could cover wages paid to non-immigrant visa holders in the U.S. Anti-abuse provisions may also stop the misuse of setting up subsidiary offices in the US. If this is so, it will adversely impact international students seeking careers in the US.
The United States remains the world’s top destination for international students, hosting over 1.58 million in 2024. Students from India represent 27% of this and are the fastest-growing group. Unlike the Chinese, most Indian students pursue advanced degrees in STEM with the sole purpose of finding lucrative jobs. Normally local talent supply doesn’t meet the demand of this sector.
Most international students are some of the best brains from around the world, and they add humongous value in terms of innovation and inventions and will eventually contribute majorly as part of the workforce. The Optional Practical Training (OPT) was designed to help international students contribute to the corporate sector, and nearly 100000 Indian students found OPT extensions, most of them filling crucial gaps in the innovation ecosystem. America’s competitiveness in sectors like AI and biotech stems from such diverse talent absorption.
The dilemma the HIRE Act brings is palpable. If it is passed, the offshore industry will be in a tight spot, no doubt. The higher costs of offshoring will restrain the American enterprises and will force them to look at onshore hiring as it was decades ago. This may seem beneficial for the international students graduating from the US
universities, as they are physically present onshore and well-trained. But the term “foreign person” is causing major concerns amongst the students, as it could include them under the provision. If so, the wages paid to the F1 visa holders under the OPT scheme could be subjected to the same tax structure.
More worrying is the heightened visa restriction, which compounds the level of uncertainty. The current Trump government has revoked F-1/M-1 visas for minor compliance lapses, shut down third-country visa processing options, and tightened interview requirements. Students face several risks now if they are investing in their US education with a view to securing better jobs. The big question in their minds is whether the US markets will be like the UK and European ones for students seeking jobs.
Despite the rhetoric of reshoring, economic logic points the other way. Even factoring in higher costs under the HIRE Act, outsourcing to India remains 20–40% cheaper than doing it locally. American companies know this, as they have been dependent on a hybrid model for competitiveness. Bringing long-term offshoring contracts to a sudden ending is not easy either, not just in terms of costs but in learning curves, customer disconnect, weakening resilience, and human capital.
Further, there exists a STEM talent shortfall in the US market. The universities are not producing enough domestic graduates to bridge this gap owing to multiple reasons, especially in emerging fields like AI, cybersecurity, and semiconductor design. Indian students passing out of IITs and graduating from US universities offer culturally integrated and well-trained talent solutions. It is not outsourcing in any manner and provides a very crucial human capital advantage. No corporation, let alone the US ones, can ignore this.
The strategic case for more employment pathways
Rather than shrinking opportunities, the U.S. should expand them. Clearer, safer, and longer work authorisation for STEM graduates would ensure that international talent strengthens, not weakens, the competitive advantages. OPT extensions should be protected, and visa renewal backlogs resolved. Employers and universities must also advocate more vigorously for these pipelines, emphasising their role in keeping America competitive.
For India, the lesson is dual. On one hand, it must prepare the students for uncertainty by diversifying destinations. Countries like Germany, Canada, and Australia are already rising in popularity. On the other hand, India’s IT sector must continue moving up the value chain by investing in deep tech, AI, biotech, and advanced R&D. This will ensure that its graduates remain globally indispensable, whether or not U.S. immigration ebbs and flows.
The HIRE Act may not pass; similar bills in the past stalled under lobbying pressure from corporations. But the political climate has shifted toward protectionism, and this bill has a more credible chance of advancing. The risk cannot be dismissed.
This is a paradoxical moment for Indian STEM students. Protectionist measures raise barriers, yet they highlight the indispensability of their skills. If U.S. firms must hire
locally, then U.S.-trained graduates become even more valuable, provided the law does not inadvertently place them in the “foreign” penalty box.
The writer is a Fortune-500 advisor, start-up investor and co-founder of the non-profit Medici Institute for Innovation
Published on September 11, 2025
