The Ugly Side Of Donald Trump’s The One Big Beautiful Bill

A proposed US tax on foreign remittances threatens to destabilise a key pillar of India’s economic resilience: its steady and substantial flow of foreign income from its global diaspora. At stake is not just billions in lost remittances, but also broader implications for currency stability, household consumption, and global capital flows.

Part of a sweeping legislative initiative titled “The One Big Beautiful Bill”, introduced in the US House of Representatives on May 12, the proposal seeks to levy a 5% tax on money transfers made by non-US citizens—including green card holders and visa workers.

India: The Most Exposed
No country is more exposed to this measure than India. With total remittances reaching $120 billion in 2023–24, India is the world’s largest recipient. According to a March 2024 Reserve Bank of India survey, nearly 28% of that came from the United States alone—making it the single largest source of India’s remittance inflows.

A 5% tax risks disrupting this vital flow. If it leads to a 10–15% drop in remittances, India could face an annual shortfall of $12–18 billion. That decline would immediately tighten the supply of US dollars in the Indian economy, exerting pressure on the rupee and forcing the Reserve Bank of India to consider more frequent interventions to stabilize the currency. The rupee could weaken by ₹1 to ₹1.5 per US dollar as a result.

Macroeconomic Risk
The effects would also be felt at the grassroots level. In states like Kerala, Uttar Pradesh, and Bihar, remittances fund essentials like education, healthcare, and housing. These are not luxury transfers—they are financial lifelines. A reduction in remittance flows would curb household consumption, potentially dragging down domestic demand at a time when India is already navigating inflation and global economic headwinds.

India is not alone in its vulnerability. Countries like El Salvador and Mexico—where remittances contribute significantly to GDP—could also suffer. Mexican President Claudia Sheinbaum has already called the US proposal “unacceptable,” warning against “double taxation” of immigrant workers who already contribute to the American economy. Ironically, while the US may succeed in curbing dollar outflows, the result may be a modest appreciation of the dollar, which would make American exports less competitive—a potential self-inflicted wound in the global trade arena.

A Shift in Global Capital Philosophy
Beyond immediate economics, the proposal reflects a philosophical shift in how developed nations treat capital mobility. Of the four classical factors of production—land, labor, capital, and enterprise—capital has long enjoyed the greatest freedom across borders. This tax introduces a precedent that could signal more constraints ahead.

For developing nations, this risks narrowing one of the few remaining avenues for financial inflows that are independent of foreign direct investment or aid. It threatens to weaken household incomes, reduce economic resilience, and strain the very mechanisms that have helped lift millions out of poverty.

What began as a domestic revenue measure in the US has the potential to become a globally disruptive force. For India, the stakes go far beyond lost income—they encompass currency management, domestic welfare, and the sanctity of global economic linkages.

As the proposal moves through the US legislative process, India and similarly affected nations will need to weigh their diplomatic and policy responses carefully. This is not merely about taxation; it is about the future of cross-border economic interdependence.