The U.S. House of Representatives has passed the "One Big Beautiful Bill," which includes a 3.5% tax on international remittances sent by non-citizens, such as H-1B visa holders and green card holders. This tax is expected to take effect in 2026, pending Senate approval. The proposed U.S. remittance tax and reciprocal tariffs are poised to significantly impact India's economy, potentially resulting in billions of dollars in lost investments.
Impact on India: India, being the world's largest recipient of remittances, could face a substantial decline in inflows. In 2024, remittances to India totaled $129 billion, with 28% originating from the U.S. The new tax could reduce remittance inflows by billions of dollars, affecting households that rely on these funds.
Reciprocal Tariffs: The U.S. has also announced 10% reciprocal tariffs on imports, which could increase trade costs and impact Indian exports. The Centre for WTO Studies projects that these measures will amplify trade costs, disproportionately affecting Indian households reliant on overseas earnings.
Economic Consequences: The combined effect of reduced remittances and increased tariffs could tighten household budgets in India, slow local consumption, reduce returns from physical and financial assets due to lower investment, and weaken one of the country's most resilient sources of foreign exchange.
These developments underscore the need for India to diversify its trade relationships and strengthen domestic economic resilience to mitigate the potential adverse effects of such international policy changes.
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