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Trump offers India chance to stop brain drain

Modi must act fast, or see graduates head for Canada, China, Japan instead of US

| India

For years, a major question about the Indian economy was what it would take for its top engineers and other professionals, to stay in the country, instead of migrating to the U.S.

Not any more. Since President Donald Trump's inauguration in 2017, the brain drain has been reduced by his Republican administration's restrictions on skilled worker visas.

Trump's policies are backed by some lawmakers from the rival Democratic Party. So, over the next several years, the opportunities for Indian professionals to migrate to America will continue to diminish.

The question now is -- can businesses in India retain the country's top engineering, science and math graduates, who are seeking alternatives to moving to the U.S., by offering them attractive rewards? Or will there be a shift in outflows, with many professionals migrating and boosting the economy of Canada or even China?

Each year, about 9,000 world-class engineers graduate from the renowned Indian Institutes of Technology (IIT). Until recently, most enrolled for advanced degrees in the U.S., as part of their plans to emigrate to the U.S. Even when American Universities sharply cut financial aid to students, Indian parents took on educational loans of $100,000 or more to pay for fees and other costs. The loans, with annual interest charges of up to 14%, were borrowed from Indian banks by putting up the family home as collateral. Upon graduation, the students expected to find high-paying jobs in America on skilled worker visas, which would enable them to repay the loans.

Today, given the very low prospects of finding U.S. work visas, most IIT graduates are not pursuing advanced degrees in America. In 2017, the IITs reported that fewer than 20% of graduating students went to the U.S. The numbers shrank further in 2018. In contrast, up until the early 2010's, two thirds or more of these fresh engineers would migrate to the U.S.

The IIT graduates fear being unable to repay the educational loans to study in America and thereby risking losing the family home. Instead, over 80% of them now take up jobs in India mainly with foreign companies, especially Google, Apple, Microsoft, Uber and other major American technology companies. The foreign companies offer high salaries and benefits compared with Indian companies. Also, the graduates expect that the foreign companies may assign them to lucrative postings outside India. Some of the engineers are also migrating to Canada, which is aggressively seeking skilled foreigners. A few are finding work in Japan and in China. In 2017, for instance, Japanese companies made offers to 22 graduates of IIT Bombay. And several Indian engineers were among the 1,600 who got permanent resident visas in China in 2016.

Like the IIT graduates, India's top science, math and medical graduates are also realizing they face a big risk of losing their family homes to the banks, if they take on education loans for studies in America. More are following the example of IIT students and seeking alternatives, including finding jobs in India.

As more top Indian engineers stay in India, some of them are starting their own enterprises, as their predecessors have often done in the U.S.

In India, the post-2010 wave of technology entrepreneurs is benefiting from the rapid growth in mobile internet users. Their startups are more numerous and varied than the information technology outsourcing companies founded in India in the 1980s. Several recent startups are valued at over a billion dollars, ranging from the taxi-hailing service Ola to the online retailer Flipkart, which was acquired by Walmart in 2018. Both these businesses were founded by IIT engineers who had earlier worked for American companies in India. Their business success is encouraging other professionals to risk starting a business.

Indian Prime Minister Narendra Modi is trying to help. By 2022 he hopes to attract over $18 billion from private investors to boost digital businesses, including by connecting every village to the internet. This plan requires a big increase in the number of computer science and other high technology graduates.

But Modi's government has limited funds to set up new state-run schools and colleges, expand and improve existing educational facilities as well as subsidize fees. So he rightly is trying to get private investors to build for-profit educational institutions.

India has no shortage of students who can master computer, internet and other advanced technology and math skills. The problems lie in providing and financing their studies.

Modi expects parents will take on educational loans, eager to help their children find better careers. But poorer parents -- the great majority -- balk at the costs. Graduates from most private colleges do not generally find jobs good enough to enable them to repay loans, when the fees run as high as 6 million rupees for a four-year engineering course.

The government must do two things. First, it should implement regular audits of private colleges and take steps to accelerate the closure of those that offer worthless degrees, exploit parents or are badly managed. This will leave the way open for the well-run colleges to grow.

Second, New Delhi should offer low-interest loans to engineering, science, math and medical students, at good-quality for-profit institutions as well as public universities. Repayment terms should be tied to the salaries received upon graduation, making the loans attractive to students from poor and middle-class families.

The global domination of American technology companies clearly shows the importance of offering superior financial rewards to attract the best talent, including Indian engineers. Indian startups, as well as business groups controlling larger Indian companies, need to offer generous stock options and bonuses to hire top Indian professionals. Such rewards to employees, tied to the financial success of a company, will likely help many Indian companies grow into global giants. It will also help reduce India's brain drain.

Vijay Shekhar Sharma, the founder of the Indian digital payments company Paytm, says he wants to build the first $100 billion Indian company, and make India proud. To reach this goal, Sharma must hire the best Indian engineers by offering them financial and career packages superior to those offered by Google or Amazon, or China's Alibaba and Tencent.

Ignatius Chithelen is manager of Banyan Tree Capital, New York, and author of "Passage from India to America: Billionaire Engineers, Extremist Politics & Advantage to Canada & China."

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