Turning the tide on brain drain

Addressing this issue could have a big payoff for the government

About 32 million people born in India prefer to live abroad. Approximately 18 million have become citizens elsewhere, and around 14 million are non-resident Indians, or NRIs. A substantial portion of the diaspora is highly educated. Many went abroad to study and subsequently found employment. Others are high-net-worth individuals, who opted to pay for golden visas in places like Dubai and Singapore, where taxes are low and the ease of doing business is high. 

The first few waves of Indian immigration consisted of slave labour transported to run plantations in Fiji and Guyana, and build railways in Africa. They were followed by small traders. Once Britain and North America eased immigration controls in the 1960s, highly educated professionals started to emigrate. Over half of every batch of Indian Institute of Technology (IIT) graduates end up overseas. Also from the 1960s onwards, pioneers like Aditya Birla and then the generation of Lakshmi Mittal and Anil Agarwal, among others, started to establish big businesses abroad.

Anecdotally, migration may have accelerated in the last decade. But these numbers are lagged (it takes years to acquire US citizenship, for instance) so it’s hard to be certain. A substantial number of start-ups have been established by Indians in Dubai and Singapore in the past few years.

Taken together, that 32 million equates to a big opportunity cost. That is roughly 2.2 per cent of India’s population but if they lived and worked out of India, they would add far more to gross domestic product or GDP. Person-to-person remittances into India through official channels crossed $100 billion in 2022. That itself amounts to 3.7 per cent of GDP. If those desis lived and worked here, they might add several multiples of that to GDP. There are also young people looking to move abroad every year, whose skills and earning capacity will be lost if the brain drain continues. 

What are the reasons for emigrating? One is the comparative lack of opportunity for the highly educated. Be it business or research or professional opportunities, there are far more options abroad. Another reason often cited is the weakness of Indian passports. An Indian citizen has to jump through hoops to get visas to practically any First World destination (unless they have wangled permanent residency somewhere else). Hence, the golden visas and the rush for 10-year US visas.

A third reason is the complex, bewildering tax and licensing regime. Setting up a business in India is a terrifying (and interminably boring) process because of the sheer number of boxes that must be checked. So is the paperwork associated in filing taxes and keeping accounts straight on a running basis. If there’s a contractual issue, India is among the world’s worst places in terms of resolution. It gets worse for businesses with cross-border transactions. Any policy that tries to plug the brain drain would involve looking at these pain points.

Why do Indian passports set off red flag for immigration officials everywhere and why hasn’t the government actively tried to improve access for Indian passport holders? All the diplomatic outreach by the Indian government and all the trips abroad don’t seem to have made it any easier for ordinary Indians to travel. 

Creating opportunities for the highly educated in India involves encouraging research institutions and high-tech businesses to locate here. India has a pathetically low ratio of domestic investment in research, both via government budgetary support and private institutions doing R&D. Attracting more R&D investment would involve easing the R&D investment rules. Tax breaks for this, alongside fewer controls on academics coming to India, would go a long way.  

Which brings us to a broader point. Streamlining tax processes and paperwork would be a big deal and not just for the entrepreneur considering India versus Singapore. It would also be a big deal for existing businesses located domestically.

Obviously, this isn’t a low-hanging fruit since no government in the last 50 years has been successful at reversing the brain drain. But the numbers suggest there could be a very big payoff if any government went into mission mode to reversing the brain drain.