Author: Pramit Pal Chaudhuri
Publication: The Hindustan Times
Date: January 28, 2003
URL: http://www.hindustantimes.com/news/181_148694,00300005.htm
Few debates are as impoverished
as the ones Indians have about their diaspora. Over the years the chattering
classes of India have spoken about their overseas brethren through a spectrum
of emotions ranging from whiny to jealous to ill-informed.
One remembers the pointless heartache
about the brain drain. This was little more than a consequence of an overproduction
of college graduates, in turn the inevitable fallout of grossly subsidizing
higher education.
But rather than tackle the subsidy,
Indian thinkers spent their time proposing hare-brained schemes to keep
Indians back home. The more rigorous plans were clearly out of line with
India's being a constitutional democracy. Others had the government spend
absurd amounts of money to entice diaspora brains back for little or no
benefit to the country as a whole.
And when somebody actually sat down
to measure the brain drain it was exposed as little more than a media scare.
A 1998 study showed that only 2.6 to 2.7 per cent of India's college educated
had moved to other shores. In comparison: a developed country like Canada
loses 0.1 to 0.2 per cent of its brains, a wealthy Asian tiger like Taiwan
8.4 to 9.2 per cent, and basketcases like Iran or Nigeria have figures
in the 25 to 35 per cent range. What was remarkable was how reluctant educated
Indians were to leave their country.
Investment imbroglio
The loudest bit of whingeing going
on these days is why overseas Indian's don't invest as much money as their
Chinese counterparts. Plenty of explanations are given. They are less patriotic.
More stingy. Too taken with the West.
The only serious study to find out
why the Chinese pour in so much more money than Indians. And the economists
Amit Ray and Ashok Guha who did it for the Indian Council for Research
in International Economic Relations put the difference down to circumstance.
The bulk of overseas Chinese investment
comes from the diaspora that lives in an arc of countries running from
Taiwan to Thailand. In these countries, the commercial classes are almost
wholly of Chinese origin. These businessmen cut their globally competitive
teeth during the 1970s, when the various Asian tiger economies exported
their way out of poverty.
By the 1980s these same overseas
Chinese factory-owners were facing rising labour costs, especially in Taiwan,
Hong Kong and Singapore. So it was only natural that these makers of toys,
wigs, textiles and so on shifted their assembly lines to a mainland China
whose economy was opening up.
This explains the present Chinese
export machine. It's centred around making and shipping light manufactured
goods because that's the type of business overseas Chinese businessmen
knew best.
It may have also led to Beijing's
remarkable dependence on the US market - that was the market overseas Chinese
knew best.
The economic character of the overseas
Indian is radically different. There are roughly three chunks of the diaspora
who have strong economic links with the homeland: the Persian Gulf expatriate
workers, the largely Gujarati and Sindhi trading diaspora and, finally,
the middle-class professionals who live mostly in Great Britain and North
America. Note the lack of a group with broad manufacturing experience.
Each of the three contributed economically
to India according to the best of their ability. The Persian Gulf workers
simply wired hard cash back to their families and, more recently, bought
Indian government bonds. The traders contributed the least. But what does
a trader do for a country that even after a decade of liberalisation is
among the most protectionist in the world?
And then there are the Anglo-American
professionals.
Not entrepreneurial by nature, what
these doctors, scientists and engineers had in abundance was knowhow. And
that brainpower is exactly what they have been exporting back to India
in ever increasing amounts.
The most obvious example has been
the overseas Indians' role in planting the seeds for the country's information
technology boom. A study by a University of California Berkeley professor,
AnnaLee Saxenian, showed that once an Indian in Silicon Valley set up a
firm, he or she would promptly try to cut costs by setting up a subsidiary
in India. Silicon Valley's Indian engineers, she writes, "have become key
middlemen linking US businesses to low-cost software expertise in India."
Other analysts have traced the origins
of Indian infotech to the first Indian computer programmers who worked
in the 1970s for early California-based computer firms like Sperry Rand.
There are other areas where overseas
Indian professionals are starting to have an impact in the homeland - for
example, healthcare, education, pharmaceutical and biotechnology.
Every major city in the country
has a dozen or more private clinics and hospitals partnered by Indian doctors
from the United States and Britain. The same goes for private educational
institutes. Brain recirculation is starting to occur in pharmaceutical
and biotech firms in India. Indian drug firms like Nicholas Piramal and
Wockhardt get between 15 to 40 overseas Indian scientists applying for
jobs on their websites each week.
Signature service
It still doesn't add up to the kind
of money the overseas Chinese are pumping in. But keep in mind that moving
a software firm requires a lot more environmental preparation on the part
of the motherland than transplanting a hosiery factory. And when one gets
into socially sensitive areas like health and schooling, India still has
miles to go in terms of laying out a proper regulatory and infrastructural
red carpet for investment. The investment is less, but that's because it
is a type of investment that is more difficult to make.
The economic nature of the Indian
diaspora, it strikes me, could partially explain one of the continuing
surprises of India's economic reforms. Namely, that instead of repeating
the East Asian success story of becoming an exporter of manufactured goods,
Indian businesses found their competitive edge in the service sector.
Anyway, the point is that there
are reasons why the Indian diaspora has not mimicked the overseas Chinese.
And that's because circumstances have made them as economically unlike
as apples and avocados.
The study by Ray and Guha makes
the point that if one looks at foreign direct investment by multinationals
into India and China, a culture-neutral measure, and adjust for China's
having opened its economy a decade earlier than India, than the two Asian
giants are more or less on par.
Finally, perhaps the most striking
contribution of the overseas Indian has been his or her success. Under
the Nehruvian system, India fell first into complacency and then stagnation.
As it fell further behind, India's leaders became experts at finding excuses
for being so laggard. In the end it boiled down to the argument "We are
like this only."
What a contrast with the confident
middle class that is the mark of today's India. And this is in no small
part to the evidence in the United States and elsewhere that, given a proper
environment, Indians not only do well but do remarkably well. It is also
my view that Indians seeming preference for flourishing only in liberal
democratic environments is one reason that, in the long run, will allow
them to eventually outshine their Chinese neighbours. But that's another
story.
