The New Indian Economy

Miho Sakata Malhan

Advanced English
ENFL 055.01

Georgetown University
Center for Language Education and Development

Fall 2003



I. Introduction

II. Background of India's brain drain

III. Indian workers in the U.S.

IV. Contribution of Indian workers to the U.S. IT industry

V. Advantages and disadvantages of Indian's brain drain

VI. Current situation of the IT Industry in India and the U.S.

VII. The new Indian economy

VIII. Conclusion



Soon after India gained its independence from Britain in 1947, the country's leaders began to create the foundations for a new country. Prime Minister Nehru built the Indian Institutes of Technology (IITs), and today the country has six IITs.

The IITs and other schools have educated excellent students, but many of them went to the West, especially to the U.S. The Indian brain drain began in the late 1950's, and it has continued for a half century.

In the 1990's, with the IT boom in Silicon Valley, California, countless Indian IT specialists migrated to the U.S. The U.S. government and IT companies welcomed these workers.

Because of the brain drain, India has lost many well-educated young people. Moreover, according to the United Nations Development Program (UNDP), India has lost 2 billion dollars per year because of the brain drain. On the other hand, India has acquired a reputation as an IT specialist country.

The IT boom in the U.S. crashed in 2000, and many Indian workers lost their jobs. However, these days, many Indians are returning home, and now, U.S. trained Indians are contributing to their homelands' economic development.

Recently, there have been signs of a high-tech boom in India, and U.S. trained Indians are starting their own businesses in India. At the same time, U.S. companies are expanding their offices in India by hiring low-paid workers. If the financial benefits can be evenly distributed between India and the U.S, the trend will encourage the Indian economy.

(248 words)


The New Indian Economy

(I. Introduction)

Since India became independent from Britain in 1947, India has been facing a serious phenomenon which is called a'brain drain'. "Brain drain means'a movement of highly skilled or professional people from their own country to a country where they can earn more money" (Longman Dictionary). India's brain drain began in the late 1950's, and India has continuously exported highly educated professionals to developed countries, mainly to the U.S.

In the mid-1990's, an IT boom occurred in Silicon Valley, California, and the wave of prosperity resulted in a huge number of engineers and specialists immigrating from India. Year after year, the U.S. Congress raised the limit of H1B-visas, and India was issued more than 20 percent of the world wide total. "In 1993, 84 percent of new computer science graduates [in India] headed for jobs or advanced study in the United States" (Constable A23).

After 2000, the IT bubble burst, and many people lost their jobs, including Indians who worked in the U.S. Now, there are signs the brain drain is reversing. The Indians who have work experience in the U.S. are looking homeward, especially to Bangalore, which is well known for its IT industry. It is a difficult situation for the people who lost their jobs in the U.S., but for the future of India, it is positive.

Undoubtedly, India has suffered a brain drain for a long time, but it mustn't be forgotten that India didn't have enough opportunities to attract well-educated young citizens. On the other hand, the U.S. offered great possibilities. Thus, the brain drain was an unavoidable situation.

However, the situation is now changing. Several U.S. companies are expanding their offices in India, and they are hiring U.S. trained workers who are interested in returning to India. At the same time, the Indian government and other organizations have started to encourage entrepreneurs and invite U.S. companies and investors. India's brain drain is a relic of the past, and the phenomenon should now be called'brain circulation'.

"They are bringing back the money and they're bringing back the business contact, it is fantastic" said Dewang Mehta, president of NASSCOM, a New Delhi based software lobby group ( Although India lost business opportunities because of the brain drain, now India should encourage its entrepreneurs to establish new businesses and improve the infrastructure.

(II. Background of India's brain drain)

India gained its independence from Britain in 1947, and the country's leaders began to create the infrastructure of the new country. One of the remarkable events was the establishment of the Indian Institutes of Technology (IITs) in the late 1950's. "Prime Minister Jawaharlal Nehru founded the IITs'to train an elite that could build and manage massive industrial development projects"(Constable A23).

The Indian government has six IITs, located in Kanpur, Kharagpur, Bombay, Delhi, Chennai and Roorkee. Each year, more than 100,000 students take the IIT entrance exam and only 2,000 of them are admitted. The competition rate is much higher than for admission to Harvard and Stanford in the U.S. (

Contrary to Nehru's vision, although, the IITs and other schools, like the Indian Institutes of Management (IIMs), Regional Engineering College, Madras University, and Pune University, offered on excellent education, many students left the country and went to the U.S. without making any contribution to their own country. The issue became conspicuous in the late 1950's, and it has continued for a half century.

Finally, in the 1990's, with the IT boom in Silicon Valley, countless Indian IT specialists migrated to the U.S. In fact, the brain drain was an unavoidable phenomenon. India is a developing country with much poverty. There were not enough companies which could accept well-educated young people, and the business infrastructure was really poor.

It was natural that energetic and smart young people headed to the West, especially to the U.S. Many of them had ambitions to grab the American dream. America was a symbol of freedom, and working in the U.S. was really exciting for young people. The trend occurred not only in India, but also in many other countries in Asia, for example, China, Taiwan, and South Korea.

(III. Indian workers in the U.S.)

Year after year, the process of getting a U.S. permanent resident card (green card) becomes more difficult, but compared to other industrial countries, the U.S. is more receptive to immigrants. Especially, Indians have been given priority to work in U.S. companies.

"Although hundreds of thousand of people around the world apply for such visas annually, American employers like Indians because their English is good, their demands are minimal, and their government's educational system has given priority to computer training far longer than many other countries" (Constable A23).

In the 1990's, during the IT boom, the U.S. issued a huge number of temporary (3 to 6 years), professional working visas(H1B), to Indian workers."The US senate increased the quota of H1B visas for skilled workers from 115,000 to 195,000 in 2000. Indians now receive nearly 45 percent of such visas each year" (Creehan 6).

(IV. Contribution of Indian workers to the U.S. IT industry)

Indian workers in the U.S. have contributed to the progress of the IT industry and encouraged the U.S. economy. "Indians believe their culture, language and education system create students naturally suited to excel in areas like math and computer code writing" (

In fact, large number of popular software applications were written by Indian code-writers ( Kanwal Rekhi, a Silicon Valley entrepreneur and IIT alumnus, says that the Indian mind is philosophical and freethinking. Additionally he believes that mathematics is a part of the daily life in India, and Indians are mathematicians (

(V. Advantages and disadvantages of Indian's brain drain)

While the Indians were working for U.S companies, their motherland was struggling. India had great human resources but had not profited from them. "With the exodus of many of India's best minds to the West in the following decades, many Indians railed against what they saw as a taxpayer-financed subsidy for Western industry" (Creehan 6).

According to a report which was issued [in 2001] by the United Nations Development Program (UNDP), India was losing 2 billion dollars per year because of the emigration of computer experts to the U.S. (BBC News). Certainly, India may have lost many resources through the brain drain, but at the same time, India acquired a reputation as an IT specialist country.

The UNDP report said:"The success of the Indian diaspora in Silicon Valley [...] appears to be influencing how the world views India, by creating a sort of "branding'. [...] Indian nationality for a software programmer sends a signal of quality just as a 'made in Japan' label signals first-class consumer electronics" (BBC News).

The IT boom, which swept over the U.S., burst in 2000. Afterwards, countless IT firms went bankrupt, and a large number of workers, including Indians, were fired. After the terrorist attack of September 11, 2001, the situation grew more serious."California's employment figures reveal that in Santa Clara---the hub for Indian information technology professionals---over 190,000 workers lost their jobs in the past two years [2001-02]" (United Press International).

If a foreign worker lost his or her job, the person would lose the H1B visa status at the same time. Thus, if the person couldn't find another job, he or she had to leave the U.S. immediately. However, these days, many Indians are choosing to go back home.'In the past, the only way people returned to India was when they were pushed out; now it is voluntary'(United Press International).

(VI. Current situation of the IT Industry in India and the U.S.)

In the past few years, dozens of Indians have returned to start up their own companies. At the same time, U.S. companies have begun to pay attention to the Indian market."A growing number of big name American firms -- led by Microsoft, which opened a research and development center in Hyderabad in 1998 -- are taking advantage of newly liberalized Indian laws that allow more foreign investment and joint ventures" (Constable A23).

For example, Oracle, a software company, has already advanced into the Indian market."Ten percent of the 4,000 new positions in Oracle's expanded India location are filled by Indians formerly based in the United States"(Jayadev).

In July 2003, Silicon India Magazine hosted a job fair in Santa Clara, California, which is in the heart of Silicon Valley. About 2,000 professional tech workers of Indian origin attended the fair and handed their resumes to recruiters of U.S. companies which are starting operations in India. Intel, Microsoft and National Semiconductor Company topped the list of the 28 participating (Jayadev).

"When countries create the right conditions, including openness to new investment and new ideas, they can recapture some of what they have lost. The Indians in Silicon Valley are an important part of Bangalore's success" (BBC News).

Today, India is not suffering from a brain drain. Indeed, there are many signs that the brain drain is reversing. These days the phenomenon is called'brain circulation' and the U.S. media have started to write about the Indian economy.

For example, on October 20, 2003, The New York Times published 'Sizzling Economy Revitalized India'. The article mentions the optimistic prospects of the Indian economy, and it refers to other Indian industries like auto parts and motorcycles.

One month later, The New York Times picked up a story about India again in 'Sleepy City Has High Hopes, Dreaming of High Tech'. According to the article, not only Bangalore, which is a remarkable IT hub city, but also other small cities like Chandigarh are growing tech cities.

The New York Times used to publish articles on the negative aspects of India, for example, disasters, poverty, disease, or strange customs, but now its point of view is changing. Additionally, the Business Week magazine, which was issued on December 8, 2003, published the article'The Rise of India' as its cover story. Through 10 pages, the article reported on the latest Indian economy and its future.

The U.S. Congress announced a reduction in the number of H1B visas from 195,000 to 65,000 in the next fiscal year, October 2003 to September 2004 (Einhorn). The drastic cut will hit the IT industry both in the U.S. and India.

S. Ramadorai, who is the chief executive officer of Tata Consultancy Services (TCS), India's largest IT service company, is hopeful: "Companies will work out new business models and push [even] more work offshore. [...] The customer will simply send the project to India. This will encourage [job] emigration" (Einhorn).

One of the current hot topics among politicians and specialists in the U.S. is'the jobs that U.S. companies have outsourced to lower-cost locales such as India and China' (Einhorn). If the financial benefits can be evenly distributed between India and the U.S., the trend will encourage the Indian economy.

"Most people instinctively assume that the movement of skill and talent must benefit one country at the expense of another. But thanks to brain circulation, high-skilled immigration increasingly benefits both sides. Economically speaking, it is blessed to give and to receive" (Saxenian 28-31).

(VII. The new Indian economy)

The new century of India has dawned with the beginning of the 21st century, and India is facing the most important period in its long history. Now, its untapped potential should be used wisely. However, there are many obstacles to grow the Indian economy, and plenty of skeptics are pessimistic on the prospects for the Indian economy.

The Indian government and other organizations should make an effort to establish a business infrastructure and new business laws, and they should solve other fundamental problems as well. India has an enormous population - over a billion - and 26 percent of Indians live in poverty (Waldman A7). And the literacy rate in India is only 65.38 percent, which shows the necessity for more elementary education (Census of India, 2001).

The lack of highways prevents the growth of industry and the construction of highways is one of the important priorities. In fact, the new Bombay-Pune highway shows how highways can improve the Indian economy."Pune can ship its goods efficiently and link up with the outside world. As a result, it's one of India's new boom towns and is exporting globally both software and manufactured goods such as auto parts" (Business Week, 78).

Nevertheless, India is facing a great opportunity."The challenge for developing countries, the UN says, is to come up with strategies to keep some professionals at home and encourage other to return" (BBC News). Many young Indians who have had a relationship with the West, especially the U.S., can now build a new economy for their homeland as they become bridges to connect India and the West.


Works Cited

AnnaLee Saxenian. "Brain Circulation" The Brookings Review, Winter 2002. 28-31.

Avalos, George. "Foreign Technical Workers in Walnut Creek, Calif., Area Aid Home Countries" Knight Ridder Tribune Business News, 19 Apr. 2002.

" Brain Drain Costs Asia Billions" BBS News, 10 Jul. 2001.

Census of India <>

"Commentary: India's Reverse Brain Drain" United Press International, 25 Aug. 2003.

Constable, Pamera. "India's Brain Drain Eases Off" Washington Post, 14 Sept. 2000: A23.

Creehan, Sean. "Brain Strain: India's IT Crisis" Harvard International Review, Summer 2001: 6-7.

Einhorn, Bruce. "An Irresistable Offshore Tide for Jobs" Business Week Online, 19 Nov. 2003.

Hattori, James. "Reversing India's Brain Drain", 25 Aug. 2000.

Jayadev, Raj. "Reverse Brain-Drain: U.S.-Based Indian Tech Workers Go Home" Pacific News Service, 1 Aug. 2003.

Longman English - English Dictionary.

Rohde, David. "Sleepy City Has High Hopes, Dreaming of High Tech" New York Times, 20 Nov. 2003.

"The Rise of India" Business Week, 8 Dec. 2003. 78.

Waldman, Amy. "Sizzling Economy Revitalizes India" New York Times, 20 Oct. 2003: A1.

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