Indian talent pays back taxpayers, shuns Uncle Sam

For almost 50 years, the hard-earned money of India's taxpayers has gone down the "brain drain" as many of the engineers trained at the prestigious Indian Institutes of Technology (IIT) went overseas and didn't return.

That is now changing.

The supply of top-end technical talent by Indian universities is beginning to create its own domestic demand: The class that graduates from the seven IITs this month will mostly stay home - or return after short stints abroad - and pay back the nation's investment, according to a survey by Evalueserve, a New Delhi-based business-research company.

Every third alumnus of the IITs went abroad from 1964 to 2001, mostly to the United States; out of the more-recent graduates - including the Class of 2008 - 84 percent have chosen to remain in India, the survey says.

The post- and pre-2001 groups have very different attitudes.

"The drop in the number of IITians who believe the US offers a 'better standard of living' has been remarkable, from 13 percent to almost zero," says Alok Aggarwal, author of the report and an alumnus of the IIT in New Delhi.

India's example, which has great relevance for policy makers in developing nations, clearly shows that the relationship between education and growth isn't a one-way street: More of the former doesn't always produce more of the latter.

Sometimes the economy has to cross a threshold level of development before the investment in human resources - especially higher education - starts producing results.

India, which set up its first IIT in 1951, had to wait until 2002 before the promise of rapid economic growth - and new industries and companies that were born as a result of that expansion - pushed up demand for top talent to a point where the country could begin to absorb a greater proportion of the domestic supply.

"Education may influence the economy in subtle ways, interacting with other factors," says the Commission on Growth and Development, a group of business and government leaders led by Nobel Prize-winning economist Michael Spence.

"India turned out world-class engineers and scientists for decades before its economy took off," the commission said in a report released last month.

Yet, this investment in skills yielded limited economic results, says the commission, "until India discovered a global demand for software services, a demand which has since broadened to include outsourced research-and-development and a wide array of services delivered over the Internet.

"India, in short, had to solve a demand-and-supply problem, not just a supply problem," the commission said.

The changing career destination of IIT students has important ramifications for both India as well as the US.

Each year, the IITs award about 4,000 undergraduate diplomas. Typically, one out of four alumni surveyed by Evalueserve has gone on to start a company.

Others have become top executives at multinational companies or have opted to teach in top US and European universities. In other words, the direct economic output of IIT graduates has accrued overwhelmingly to the developed economies.

Vinod Khosla, co-founder of Santa Clara, California-based Sun Microsystems Inc, is an IIT Delhi graduate. Arun Sarin, chief executive officer at Britain's Vodafone Group Plc, studied at IIT Kharagpur. Narendra Karmarkar, the mathematician who wrote a linear-programming algorithm that bears his name, graduated from IIT Bombay.

As more of this top talent stays home now, domestic entrepreneurship in India is going to receive a big boost. Almost half of the respondents in the Evalueserve survey see entrepreneurial ventures emerging as the best career option for IIT graduates by 2017.

Such optimism for entrepreneurship bodes well for India because it shows that the supply of senior business leaders - which could quickly become a constraint in a high-growth economy - won't dry up, says Aggarwal.

And what will be the ramifications for the US?

A three-part study by researchers at Duke University and University of California at Berkeley offers some interesting clues.

The study showed that from 1995 to 2005, 26 percent of all the US technology and engineering companies started by immigrants had Indian founders.

Will the source of this entrepreneurship disappear? Not so soon. Standard of living isn't the only, or even the biggest, motivator for an undergraduate engineer in India planning a career. The lure of graduate education in the US is still very powerful.

However, even here there's a problem.

Thanks to a multiyear wait for permanent-residency status in the US, there is the potential for a "reverse brain-drain" of skilled workers, say the Duke-Berkeley researchers.

US education and immigration policymakers must pay close attention to the changing destination of IIT graduates. The surplus that India will export will dwindle even as the US works harder to retain the talent that eventually comes its way.

Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own.

(China Daily 06/04/2008 page16)