Trump’s H-1B visa fee a reminder of trade risks, Finance Ministry ‘monitoring’ impact on remittances and services

In the Monthly Economic Review for August 2025, the ministry said the H-1B fee is a "reminder of the risks of trade uncertainties affecting the hitherto unaffected services sector."

The recent imposition of a one-time fee of $100,000 on all future H-1B visas by the Trump administration ‘causes disruption’ in the services sector jobs, the impact of which - on future remittances and service trade surplus - will need ‘monitoring’ if the restrictions persist, the Finance Ministry said on September 26.

In the Monthly Economic Review for August 2025, the ministry said the H-1B fee is a "reminder of the risks of trade uncertainties affecting the hitherto unaffected services sector," and added that, for now, the risks "appear manageable, but they are there."

Earlier this month, US President Trump had signed a proclamation that imposed a new $100,000 fee for H-1B visas, as a one-time payment for new H-1B petitions. It does not apply to current H-1B visa holders, those seeking to renew their visas, or those who submitted their applications before the effective date.

The ministry further said that despite trade and tariff-related headwinds, India’s external sector has remained resilient. "Strong service exports and remittances have offset the merchandise trade deficit, while gross FDI inflows continue to rise, underscoring India’s appeal as an investment destination," it said.

In April-August FY26, India's services trade has recorded a surplus of $81 billion, while merchandise trade a deficit of $122 billion, according to data sourced from commerce ministry. The overall trade balance in the first five months has witnessed a deficit of $41 billion.

The MER said that India is expanding its economic partnerships, signing a bilateral investment treaty with Israel and preparing a Comprehensive Economic Partnership Agreement (CEPA) with Oman to reduce duties, boost investment, and diversify trade beyond energy imports.

At the same time, the MER said, this is not the time to drop our guard as uncertainties and risks persist. "If tariff uncertainties persist, there will be an impact on export sectors with spillover risk to domestic employment, income and consumption. Newer markets will take time to mature and contribute to export growth as established markets have," it noted.

'GST cuts to provide cushion against tariff impact'

Recognising the need to strengthen domestic growth drivers amid these heightened external sector risks, the government has announced a rationalisation of the GST regime, the finance ministry said.

"This move is expected to lower the tax burden on consumers, boost consumption, and provide a cushion against tariff impacts," it said. Additionally, it is likely to improve demand visibility for firms, enabling them to expand investment in additional capacities, it added.

As such, India’s economic outlook remains broadly optimistic despite a turbulent international environment marked by geopolitical uncertainties and shifting trade dynamics, the ministry said.

"The GDP growth surprised on the upside in Q1 FY26 (7.8 percent). Domestic components of demand have played a key role in supporting growth and is expected to remain so in the next half year as well," said the MER.

Inflation, meanwhile, is expected to remain well under control, with replenished reservoirs auguring well for the winter crop. Also, the revision in GST rates may lead to a one-time reduction in inflation over the next year, said the MER.

Crucial reform agenda of Centre

The ministry further said that the central government’s reform agenda is expected to cushion the economy against the adverse effects of trade disruptions. "Regulatory reform and infrastructure development will be key to sustaining momentum," it said.

States will do well to leverage cooperative federalism and contribute to this effort by pursuing state-level deregulation, thereby putting India’s economy on a higher growth trajectory, the ministry said.

"The near-term outlook, therefore, is characterised by steady, reform-driven growth rooted in macroeconomic discipline and adaptive economic diplomacy,
with ongoing vigilance warranted against external shocks and global market volatility," it added.

The MER said that speed of decision-making and attention to detail in execution are more critical than ever at all levels of the government - Union, States and local. "Commitment to and delivering on fiscal targets is critical to make available the stimulus of lower cost of capital to all segments of the society," it said.

On monsoon, the MER said that taking advantage of the strong monsoon and even excess rains, India must invest in water storage, deepening, desilting and rejuvenating water bodies.

Growth in agriculture can be taken up by a few notches if productivity improvements and farmer empowerment go hand in hand, it said.

Also, national security and self-sufficiency in critical primary resources will have to be kept in mind and strengthened, considering the rapidly polarising geopolitical environment, warned the finance ministry.