Sep 9: HIRE Act and India’s IT Challenge, E20 Fuel Rollout Panic

In case you didn’t know, Peter Navarro (Trump’s senior counsellor for trade and manufacturing) is not India’s biggest fan. In his latest attack on Indian trade and oil purchases he first ranted a bit on X, got schooled through Community Notes, and then got pissed and set up a poll on ‘whether X should let Indian special interests masquerade as diverse viewpoints’? Unfortunately for him, in a very public KLPD moment, 75% of respondents said Yes. Moral of the story Peterbro: Don’t pick fights on X. There’s a reason why Trump uses Truth Social.

Now, let’s get into the Dispatch! 🚀

Today’s reading time is 6.5 mins.

The Indian stock market closed higher on Monday, with the Sensex and the Nifty gaining significant points. Auto stocks outperformed on GST reform hopes, while the IT and FMCG sectors faced selling pressure.

A New Wave of Protectionism in the US: Senator Bernie Moreno (R-Ohio) has introduced the Halting International Relocation of Employment Act - better known as the HIRE Act - which seeks to penalize American companies for hiring foreign workers instead of Americans. While framed as a move to protect the middle class, the Bill has set alarm bells ringing across India’s $250-billion IT services sector.

What Does the HIRE Act Propose? At the heart of the Bill lies a 25% excise tax on “outsourcing payments”. Importantly, these payments will also be non-deductible for tax purposes, raising the effective burden on companies even higher. To channel the funds collected, the Bill proposes the creation of a Domestic Workforce Fund, which will finance apprenticeships and workforce development programs with the aim to ensure American workers are prioritized and trained for the jobs that are today flowing overseas.

A Political Push, But Will It Pass? While Moreno has said the Bill will soon be placed on the Senate floor, the legislative path is complex since it involves taxation and amendments to the Internal Revenue Code. Experts note that corporate America is unlikely to remain silent, from tech giants to smaller firms, businesses rely heavily on offshore workers to stay competitive. Similar attempts in the past have faltered, but given today’s charged political climate, protectionist proposals may find more traction than before.  

India Angle & Why It Matters: No country has more to lose in this debate than India. The US remains the biggest market for Indian IT services companies, accounting for nearly 60% of their revenues. Giants like TCS, Infosys, Wipro, and HCL Technologies, along with countless smaller IT and BPM firms, provide back-end operations, software development, cloud support, and customer services for American firms. If enacted, the HIRE Act would raise the cost of outsourcing, denting the profitability of US firms and potentially slowing the volume of work sent to India. Even freelancers, contractors, and captive centers could fall under its scope. While the availability of skilled talent in India makes a complete halt to outsourcing unlikely, companies may rethink the scale and pace of offshoring.

The E20 Chaos: Modi government’s big bet on ethanol-blended petrol, called E20, has turned into one of the most heated debates on India’s roads. While the policy aims to cut crude imports, boost farmer income, and curb emissions, its sudden nationwide rollout has left consumers confused, the auto industry cautious, and motorists angry. E20 is petrol blended with 20% ethanol, derived mostly from sugarcane, maize, and rice. India began limited trials in 2023, but from April 2025, E20 has replaced older blends like E5 and E10 across 90,000 fuel stations, leaving motorists with no alternatives. The government projects big gains—$5 billion in forex savings and an additional ₹38,000 crore for farmers annually. It also touts E20 as a cleaner fuel.

Why Are Motorists Unhappy? Unlike Brazil or the U.S., where drivers can pick fuel blends, India has left consumers with no choice. Millions of cars and two-wheelers sold before April 2023 were designed for E5/E10. Drivers now complain of: 6–8% drop in mileage, engine knocking, corrosion, and clogged filters & higher out-of-pocket fuel bills despite ethanol being cheaper. Confusion deepened after some insurers suggested engine damage from wrong fuels may not be covered, though the government insists warranties remain valid.

India-Israel Bilateral Treaty: India and Israel have signed a new Bilateral Investment Treaty (BIT) in New Delhi aiming to protect investors, ensure fair treatment, and enable independent arbitration to boost two-way investments. The agreement also paves the way for a Free Trade Agreement between the two countries in the coming months.

India-Nepal Tussle: Nepal’s ruling CPN-UML has called for India and China to withdraw their agreement to resume border trade via the Lipulekh Pass, claiming the area, along Kalapani and Limpiyadhura, as Nepali territory since it lies east of the Kali River. India has rejected Nepal's claim, stating it is neither justified nor historically accurate, and notes that trade through the pass has occurred since 1954. Nepal is now seeking high-level diplomatic talks to settle the dispute.

Doubling down on Russian Oil: India's state-owned refiners are trying to restart full purchases of discounted Russian crude oil, despite pressure from the U.S. Their efforts are currently stalled due to Russia redirecting its oil to China and increased competition from other suppliers. While India's peak buying phase may be over, the country remains committed to the trade, despite U.S. pressure and potential sanctions aimed at Russia.

Fast-Track Infra projects: India is expediting large infrastructure projects to sustain growth. Focusing on long-term plans for "Viksit Bharat 2047," a high-level committee will fast-track projects like bullet trains, new ports, and highways. The government aims to build 50,000 km of access-controlled highways at an investment of over ₹20 lakh crore over the next 10-12 years, with a significant part coming from private partnerships.

Indigenous Camera Push: An Indian semiconductor consortium, led by Kaynes Semicon, has secured contracts to supply over 5 lakh indigenous dash and surveillance cameras. The deal, which includes major players like NXP Semiconductors, aims to reduce India's reliance on imported modules and foreign IP.

Secured Card Rush: Banks and fintech companies in India are now offering credit cards secured by fixed deposits (FDs) with low limits, some as low as ₹90. This strategy helps them reach new users and expand into the untapped credit market, especially for those without a credit history. While around 100,000 such cards are issued monthly, industry experts note that less than 20% of these users eventually qualify for unsecured credit cards.