A recent UN report says that India now has the largest ‘diaspora’ in the world, with more than 16 million persons of Indian origin living abroad. This Non Resident Indian (NRI) pool represents a little over 1 per cent of India’s population but is a crucial cog in the wheel of India’s development.
How does the Indian diaspora benefit India? The biggest way is through regular remittances. According to a World Bank report released in April, India was the largest remittance-receiving country in the world, with an estimated $69 billion in 2015.
This amounts to a whopping 3.4 per cent of India’s GDP, an amazing multiplier because just 1 per cent of the citizenry, which does not even live in the country, contributes more than three times its fair share to the nation’s wealth.Stimulating the economy
There are other advantages which diaspora populations bring that are harder to measure. When they visit India, they tend to spend more lavishly than the locals, thereby helping economic activity. NRIs are more prone to donating to domestic charities because of the strong cultural and emotional feelings that they nurse.
They bring technical and domain expertise to domestic startups and often act as angel investors. Diaspora Indian faculty abroad volunteer time and resources to help faculty on Indian campuses improve the quality of education — as in the case of member institutions of the Indo Universal Collaboration of Engineering Education.
With a little commitment and some creative thinking, the government could double or even treble the already substantial economic value of diaspora contributions by carefully designing a set of policies to exploit the talent, industriousness and patriotism of those living abroad. (Full disclosure: This writer has been an NRI for 30 years).
For inspiration, India just needs to look at recent policies implemented by the US, Canada and Germany in the last 18 months to take advantage of Indian migrants. President Obama signed executive orders in May to extend the optional practical training visa durations of foreign students who earn Master’s and PhD degrees in science, technology, engineering and math (STEM) fields to two full years. In effect, using a host of legal manoeuvres towards an ultimate green card, such students never really need to return home.
In January 2015, Canada relaxed its rules to immigrate even more permanent residents under its popular, competency-based, points system. Even Germany, which is saturated with refugees now, is quietly extending an olive branch to import even more skilled workers through programs such as free tuition for post graduate education.Human capital
How much do the Indian diaspora cost India? Not much, because, largely living abroad, they do not consume the country’s public services or drain its natural resources. It is true that the Indian government spends a lot of money educating migrants before they leave for greener shores, but there are ways to recover this investment.
For example, as part of a new NRI policy, the government must immediately work with rich countries to ask that they kick back a portion of the income tax revenues they collect from the Indian diaspora.
This is fair because these countries did not invest anything in creating this talent but benefit immediately when the immigrant pays taxes abroad. If negotiations fail, India should approach the WTO to argue that developing countries must be officially compensated for the human capital they export.
India should show that it is serious about managing its relationship with the NRIs by opening a separate Minister-of-State level department for NRI administration - similar to the Veterans’ Administration in the US. This department would act as the NRI voice across various Indian government agencies and promote engagement with NRIs to help India’s larger cause.
The government should launch various win-win schemes to make it more attractive for its diaspora to step up participation in India’s development. India should formalise a rotation program wherein top NRI scientists, engineers, doctors, managers and professionals serve Indian public sector organizations for a brief period, lending their expertise. This kind of lateral induction of senior staff can do wonders to both host and contributing personnel as was evidenced by the tenure of Dr. Rajan at the RBI. Many NRIs would be willing to serve for no compensation if living expenses, travel and accommodations are paid for.In the country’s interest
India should aggressively court NRIs to invest in India — especially for projects which focus on rural development — by offering attractive interest rates on deposits. A new Foreign Currency Non Resident (FCNR) programme where each NRI can invest up to, say $100,000 per person, at 10-year rates close to the Indian domestic market (say 6.0 per cent), will bring in a flood of much needed cash and stabilise the rupee. Interest rates in most western countries are not much higher than zero. If just 25 per cent of the diaspora population invests the maximum amount, this could bring in $400 billion in new remittances to India.
As long as the interest differential is high, the likelihood that NRIs will withdraw these funds is low, so banks could essentially use new deposits to pay current interest obligations, much like the US Treasury does. While the theoretical expense of interest payouts is higher, it is no higher than borrowing from global banks with onerous lending terms.
Social media tools have made it easy and inexpensive for diaspora Indians to stay in touch with family and friends back home, and their link to India has never been stronger. It is time that the Indian government leveraged this strong bond for the greater good of the nation.
The writer is the managing director of Rao Advisors LLC