The tax on India’s talent — and why the country must push back

That story feels even sharper today, because the US now wants to tax the very services built on the backs of workers like her.

On 5 September, Bernie Moreno, a senator from Ohio, introduced the Halting International Relocation of Employment (HIRE) Act, which proposes a 25% tax on outsourcing payments made by US companies to Indian IT firms. The rhetoric is familiar: “protect American jobs.” The reality is embarrassing: the US does not have enough engineers to do this work itself, yet wants to punish the one country that does.

The fight over the HIRE Act is really a fight over how India sees itself. For thirty years, Indian IT services were treated as a back office to the world—invisible, indispensable, and undervalued. Now that the US wants to tax those very services, the imbalance is laid bare: India supplies the engineers and the code that keep the American economy running, yet negotiates as if it’s disposable.

This is not just a trade dispute. It’s a moment to decide whether India will continue giving away its invisible exports—its talent, its data, its AI training—or start treating them as strategic assets, priced and protected like any other resource that defines a nation’s future.

The stakes

Washington may talk tough about outsourcing, but the math tells a different story.

More than 60% of India’s $283-billion IT sector revenues come from US clients. The Fortune 500 depends on Indian IT firms not just for low-end coding, but for the backbone of their global operations. Global capability centres (GCCs) in India don’t run back-office work; they design chips, build AI systems, and manage mission-critical infrastructure.

And yet, in India’s own books, these GCCs are treated like glorified service centres—allowed to book profits at “cost + 5%.” Think about that. Half the global R&D headcount for some of the world’s richest companies sits here, and we value that contribution at a 5% markup. What should it be? At least “cost + 50%” — the difference between being treated as a disposable vendor and a strategic profit centre.

This isn’t an accounting quibble. It’s the story of how India undervalues its most powerful invisible export. The US Congress now wants to impose a 25% outsourcing tax, while we still refuse to impose a fair levy on the billions Google, Microsoft, AWS, and the Big Four consulting firms extract from India every year. Why should Indian engineers be taxed abroad while Silicon Valley giants pay scraps here at home?

The contradictions

The contrast with China is unavoidable. Beijing buys zero dollars’ worth of US digital services. Its market is walled off, its talent ring-fenced. That makes China harder to punish, harder to tax.

India, by contrast, has thrown its doors wide open, letting US firms dominate cloud, ads, consulting, and AI platforms without demanding anything close to reciprocity.

America’s biggest social and AI platforms—from Meta and Google to Instagram and even OpenAI—operate freely in India, honing their algorithms on the world’s largest user base. For most of them, India is their biggest market by users, if not revenues. The value they derive from that scale—training data today, exponential market potential tomorrow—is immense. And yet India prices this access at zero.

And let’s dispense with the convenient fiction that America can simply “unplug” from Indian IT. Two decades of accumulated capability and 2.5 million trained engineers cannot be swapped out for Poland, Brazil, or a corner of the US midwest. No other country offers the scale, the maturity, or the cost curve. The dependency runs both ways, but only one side negotiates as if it doesn’t.

The warnings

Industry veteran Deborah Kops has already called the HIRE Act “a meteor aimed squarely at the model” of global services. She’s right. For years, global business services thrived on what she bluntly describes as “cheap labour plus a little process standardization.” The HIRE Act is a direct shot at that foundation, and India, more than anyone else, has to decide whether to keep underselling itself or finally demand fair value.

As Kops also warned, banks once dismissed FATCA—the 2010 financial regulation—as a footnote, until it reshaped global finance at colossal compliance cost.

“Banks didn’t believe FATCA would stick. Then they spent billions retrofitting systems,” she wrote. The lesson is clear: acronyms dismissed as politics can upend entire industries. The HIRE Act may never pass in its current form, but “the very fact it’s being floated tells you which way the political wind is blowing.”

The provocation

That is why the HIRE Act matters less for its legal prospects than for what it reveals. Services are now squarely in the crosshairs of protectionism. If India continues to treat its invisible exports—its talent, its data, its AI training—as disposable, others will keep pricing them on our behalf.

And the stakes are not abstract. This industry didn’t just create revenues; it built India’s middle class. It gave millions of families their first home, their first car, their first passport. To keep undervaluing it now is to risk squandering the very foundation on which modern India rests.

So the response must be simple and unapologetic. If America insists on taxing Indian services, India must tax America’s profits in India. That is not retaliation. That is parity. And until New Delhi learns to speak in that language, the country will keep paying the bill for being indispensable yet treated as expendable.