The One Big Beautiful Bill Act (OBBBA), passed by the U.S. Congress and signed into law on July 4, 2025, is a comprehensive budget reconciliation bill that extends and modifies tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA), introduces new tax policies, and implements spending changes.
Impact on India
The USA is India’s largest trading partner. So, if anything happens to the US economy, it will affect India.
1% Tax on Remittances
India received $125 billion in remittances in 2024 (World Bank), with ~30% ($37.5 billion) from the U.S., driven by 5.3 million Indian diaspora members (U.S. Census Bureau, 2023). The 1% remittance tax, effective January 1, 2026, applies to non-citizens (e.g., H-1B visa holders, ~500,000 Indian workers in the U.S.).
Total U.S. remittances: $37.5 billion
Assuming 70% of U.S. remittances are from non-citizens (due to visa holder demographics), the tax applies to $26.25 billion, yielding $262.5 million in tax costs.
GDP Impact = India’s nominal GDP is ~$4.1 trillion (IMF, 2024). Remittances contribute ~3% ($123 billion). A $262.5 million reduction is 0.0064% of GDP.
Remittances drive consumption in states like Kerala (20% of state GDP) and Punjab (15%). A 0.0064% national reduction could translate to a 0.1% drop in consumption in high-remittance states, assuming a marginal propensity to consume of 0.8 (based on RBI studies). This equates to ~$100 million in reduced consumer spending. Remittances are mainly used for real estate purchases. It can also have a slight impact on the real estate sector.
Tax will be effective from January 2026, so we may see a surge in remittances in the short term, which will boost consumption in the short term.
Impact on India’s Stock Market
No major impact directly due to this bill. The U.S. Manufacturing Incentives can slightly impact FDI and FII inflow. The 100% bonus depreciation encourages U.S. production, which may result in increased investments in capital assets by businesses and significant Tax savings for businesses, which can improve cash flow. With high manufacturing costs and no supply chain, will the businesses invest that we will have to see.
Impact on China
China is the USA’s third-largest trade partner. So let’s see how it will impact China.
- The OBBBA’s repeal of the de minimis entry privilege, which allowed tariff-free shipments under $800, could significantly affect China’s e-commerce exports to the U.S. In 2023, China’s e-commerce exports under this threshold reached $66 billion. With tariffs potentially at 10-25%, additional costs could range from $6.6 billion to $16.5 billion, and reduced demand might cut exports by another $6.6 billion to $13.2 billion, totaling a potential $13.2 billion to $29.7 billion impact.
- U.S. manufacturing incentives, like 100% bonus depreciation, whose main intention was to shift production from China, seem to be ineffective against China.
- Stock Market Impact – The Chinese Stock market, which is not transparent due to high government intervention and opaque ownership structure, is less likely to be affected.
Impact on usa
The One Big Beautiful Bill Act (OBBBA) could modestly boost U.S. GDP by 0.8% to 1.2%, but it seems likely to increase federal deficits, not decrease. The bill benefits businesses and higher-income households through tax cuts, while lower-income Americans may face reduced access to health care and nutrition programs.
- The bill permanently extends individual tax rates from the 2017 TCJA, which were set to expire at the end of 2025, with a deficit impact of -$2,177 billion. It also expands the child tax credit by $200 permanently (-$797 billion) and includes new deductions like no tax on tips (-$40 billion) and overtime (-$124 billion) through 2028.
- Defense and Homeland Security: Increased spending on military readiness, border security, and related programs has a total deficit impact of -$144 billion for Armed Services and -$79 billion for Homeland Security. For example, $50 billion is allocated for border wall construction and $12 billion for state border security reimbursements, potentially creating jobs in these sectors.
- Health Care: The bill’s changes to Medicaid and the Affordable Care Act (ACA) marketplaces could lead to job losses in the health care sector. The CBO estimates that at least 3 million current marketplace enrollees could lose coverage due to provisions like requiring states to establish Medicaid work requirements (+$336 billion in savings) and changing eligibility rules (+$163 billion in savings). This could reduce demand for health care services and related jobs, with a net health care offset of +$986 billion.
- The bill phases out clean energy tax credits from the Inflation Reduction Act (IRA), with savings of +$191 billion from repealing EV tax credits, +$249 billion from phasing out energy investment credits, and +$131 billion from reforming other IRA credits. It promotes fossil fuels, potentially benefiting traditional energy companies but harming renewable energy firms, with a net energy offset of $199 billion.
Overall Summary: The US Deficit is going to increase, and so are the interest rates, which will create more deficit. Slowly US is going towards a vicious cycle. The only way to escape is to invest in Technologies like AI.
Sources – https://www.crfb.org/blogs/breaking-down-one-big-beautiful-bill
https://www.skadden.com/insights/publications/2025/05/the-one-big-beautiful-bill-act
https://www.congress.gov/119/bills/hr1/BILLS-119hr1eas.pdf
Note: Please share your thoughts on this article in the comment section. The analysis is based on various assumptions. If you find any assumptions, data, or analysis inaccurate, please mention in the comments. We will try to rectify it.