US HIRE Bill 'Impractical', Negative For IT Sector: Wedbush Securities' Moshe Katri

The impact of GCC, Gen AI and now HIRE Bill draft is the consistent uncertainties seen for IT players over the last few quarters, according to Moshe Katri, Managing Director—equity research, IT services & payments at Wedbush Securities.

Calling the Bill 'impractical', Katri told NDTV Profit, "HIRE Act is another attempt to cap outsourcing, and increase domestic hiring, but honestly it will create a huge bottleneck. Even if we start training personnel, it will take you some time to get there," he added.

He said that while the Bill still needs to pass the Senate, the chances are only 50% given the current administration’s 'pro-business' stance. "Whatever happens, needs to be logical to US businesses," said Katri.

Ohio Senator Bernie Moreno has introduced a new Bill— the Halting International Relocation of Employment (HIRE) Act, to protect American workers from outsourcing by disincentivising US companies from chasing cheaper wages and hiring foreign workers.

The Bill proposes a 25% excise tax on payments US companies make to foreign persons for services that benefit consumers in the United States. It also bans tax deductions for those outsourcing payments. Revenue from the tax collected will be used to fund training programs and apprenticeships for domestic workers.

According to Katri, the size of the industry makes the proposal unsettling. "Enterprises will be potentially paying higher taxes if work outsourced to India," he said.

Katri further noted that the sector is already under pressure. "Growth has slowed down meaningfully for the IT sector. Most players have mentioned of strong pipeline but seeing delayed conversions," he said, adding that the HIRE Act could weigh on sentiment further.

"Tier 1 offshore IT companies can look at cost takeout activities and figure out how to participate in Gen AI opportunity," he noted.