A proposed 5 percent American tax on transfers sent by non-citizens abroad increases the alarm in India, because it can hit Indian households and the rupee, Economic Think Global Trade Research Initiative (GTRI) on Sundays.
The provision is part of a broader legislative package entitled ‘The One Big Beautiful Bill’ introduced to the American House of Representatives on 12 May.
It focuses on international money transfers from non-American citizens, including holders of green card and temporary fishing staff such as those on H-1B or H-2A-VISA. The proposed levy does not apply to American citizens.
“The proposed American tax on transferments sent by non-citizens abroad increases the alarm in India, which loses billions in annual influx of foreign currency if the plan becomes law,” said the GTRi.
For India, the bet is high because the country received $ 120 billion in transfers in 2023-24, with almost 28 percent from the US, it added.
“A tax of 5 percent can significantly increase the costs of sending money home. A decrease of 10-15 percent in transfer flows can lead a shortage of $ 12-18 billion for India annually,” said Gtri founder Ajay Srivastava.
He said that the loss would sharpen the range of American dollars in the foreign exchange market of India, which would be a modest depreciation pressure on the rupid.
“The reserve Bank of India can be forced to intervene more often to stabilize the currency. The rupid could weaken by £ 1-1.5 per US dollar if the transfer shock extends completely,” he added.
In states such as Kerala, Uttar Pradesh and Bihar, millions of families rely on conquests to cover essential costs, such as education, health care and housing.
Srivastava said that a sudden deterioration of these currents could hit the consumption of households hard, at a time when the Indian economy is already being brought through global uncertainty and inflation pressure.
By burdening the global current current, he said, the US could disrupt an important channel of global development financing, reduce family income in poorer countries and the demand for economies that are already struggling with inequality and instability weakened.
The development gets important, as India has proposed at the World Trade Organization (WTO) to reduce the costs of cross-border capital or transfers.
Published on May 19, 2025
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