Brain Drain - The Loss of Human Capital

“People either inspire you or they drain you, choose wisely”.

-Hans F Hansen

The concept of brain drain came to India with the arrival of the British. Though in the beginning it was the emigration of labourers from India to other countries for better trade and production of raw material. Slowly as the influence of the British culture increased Indians understood it better and idealized the British life style. They migrated to United Kingdom and their colonies for better education, jobs and life. But people and government realized this in the 1960’s.
The top Indian professionals and entrepreneurs whose practise and business flourishes in either United Kingdom or United States of America had left India during 1960’s. The reason was not just the desire for opportunities but lack of specialisation. There was no scope and today also is limited to get employed in a research institute. The businessmen left in spite of having 0.7 billion people in their state during that time waiting for wan satisfying products, this was the ideal market. Their migration might be seen as a sign of greediness but it was due to improper economic and political systems.  

Reference: page 9, 1974 budget speech and page 96 of the report published.

The above image justifies the reason why business man didn’t want to stay in India.  During Indira Gandhi’s rule the top tax slab was 97.75% i.e. for every 100 rupees that the business man earns he has pay 98 rupees to the Indian Government and 2 rupees in his pocket which is not a great income.

On top of the 97.75% tax, there were several more taxes like wealth tax, inheritance tax etc. which when added up would exceed 100%!! It means after a certain slab, if you were making Rs. 100, you were supposed to pay around Rs. 103 in the form of tax!! Yes. It sounds funny but it was true. Entrepreneurs & businessmen who were making more profits were being “penalized” (in the form of exorbitant taxes) due to such policies. It was the license raj era before the liberalization policy, thus to set up a business one had to go through plenty of procedures and approvals which was difficult for business. As time is money for them. Thus one thing leading to another the brain drain from India kept increasing.

India had a rapidly growing population and millions of engineers were graduating out every year, but no jobs were being generated. Entrepreneurs had either left the country to setup their business abroad or were becoming stale here due to the above mentioned reasons. With jobs not matching the growing population, our graduates had no choice but to look for greener pastures where countries like US & UK were welcoming them with open arms.

India had entrepreneurs and professionals but the policies did not allow them to work here. Our talented brains & entrepreneurs did not leave our country, leading to brain drain. Our policies pushed them out. It drained them out! This is the background of why we face the current situation of still being called as a developing nation as our resources work in another country. These are the reasons that has led our current prime minister, Narendra Modi to discuss with the youth of India aboard about the need for “Brain Gain.”

Reference: IBN Live article from sept 28^th, 2015 during his visit to USA.

In the above article he spoke about how brain drain is the brain deposit in a country and now is the time to reverse this trend. Modi’s focus was on the youth who aspire to study outside India because the cut offs of admission in India impossible to be achieved by all is close to 100% and encourage student’s curiosity.  The opportunities and facilities provided is the attraction for students which India is unable to provide, thus the youth slipping out of India’s hand like sand. They more they held in tight the less is left in your hand. But if you mix water (opportunities and

A report by Associated Chamber of Commerce and Industry of India (ASSOCHAM) pointed out that when a large number of students flocking to foreign universities, it costs India a whooping Rs. 95,000 crores per year. The report further noted that there is a huge difference in the fees paid by the students studying in the premier institutes in India as compared to the students who study aboard. While an Indian Institute of Technology (IIT) student has to pay an average fee of $150 per month, the fee paid by an Indian student studying abroad per month is anywhere between $1,500 and $4,000. 

The following table shows the number of students who went to study aboard in the year 2009. This tabular statement is part of the report released by UNESCO on global education. Still, it is a matter of concern that despite the highly subsidized rate of higher education, especially in engineering and management, India fails miserably in attracting the best brains. Students, Seasonal workers or professionals who go abroad for work, exposure and studies at time become permanent residents due to socio-economic benefits that lure them. Thus we always hear from the world about how talented Indians are and are conquering the world with technology and business, but these Indians don’t benefit India as they do to the world. This was the WAKE UP CALL for India.

After witnessing the huge brain drain of doctors, the health ministry decided to suspend the “no obligation to return policy” to the doctors. From 2015 onwards, the students going abroad to study medical are asked to sign a bond promising their return. If the candidate fails to do so, the ministry can contact the respective country and the permission to practice in that country will be denied. India is putting his best foot forward, with the new government and their new economic policies and human capital man brains are indeed returning. Their presence can be felt with the flows of new MNC, companies and banks.

What started as technologic workers leaving the country broadened into professionals and educated people. This flow of knowledge and people was seen as the globalization of brain. But we welcomed very few to our country due to lack of socio-economic lure. This resulted in loss of human capital. Human capital formation refers to the process of improvement in the knowledge, skill, ability and physical capacity of the person.

Focusing on this concept India encouraged people to go out and study as they tried to develop. They hope that the people would return in order to help them in economic development as:

·   Absorption new techniques – techniques learnt outside helps in improving productivity in India. They are taught to workers which enhance their ability. As skilled workers have more value in market.

·   Adds to productive capacity – it is easy to work with skilled and technical worker as they understand modernization better, thus learning the change in technique quickly.

·   Instrument for economic development – education and skill development helps in making people think radically and accepting change. They have better understanding of the actions of their efforts on the Indian economy.

·   Helps in improving the quality of life – India wanted to be one of the country having the socio- economic system that helps in attracting brains back home or welcoming new ones.

Brain migration is not always carrying adverse effects even on the sending countries if there are exchange of scholars, researchers, engineers and technocrats, scientists, medical experts between developing and developed countries or within developing countries with the purpose of mutual benefits in the form of knowledge sharing. But in reality such type of brain circulation is not taking place until and unless the sending country itself become competitive enough to attract the talented mass with creating opportunities and favorable work environment for them to work. During this period our economy was not competitive, private sector was immature, research and development institutions were in infancy stage and because of inability to make use of migrant’s talents brain drain became an unavoidable process. Developing countries with these bottlenecks cannot offer modern professionals the economic rewards and desirable social conditions.

In the last few decades India has improved upon these areas. Presently, India is emerging as a favorable destination for the young talents. In India there is a remarkable progress in the development of basic infrastructure, Indian economy is sustaining in the global competition and playing effectively in the multilateral marketing structure, Indian research and development institutions are providing good research environment and giving high level research outcomes in many areas such as space technology, information technology etc., Indian multinationals have emerged as a global players in the last two decades.

Nasscom, a trade group of Indian outsourcing companies, estimates that more than 30,000 technology professionals have returned to India during years 2004 & 2005. In Bangalore, the high-tech city of India, thousands of overseas Indians (IT professionals) have set up their home. Besides Bangalore, Hyderabad and National Capital region are the most preferred destination for these returnees. As they get a western style work environment, good remuneration and quick career jumps. It has been noticed that most of returnees are first-generation expatriates, along with this second-generation Indians living in US are also returning (Saritha Rai, 2005).
There is a remarkable increase in foreign investment in research and development in India over the last years is an indicator of India’s growing reputation as an intellectual powerhouse. Return skilled workers and researchers are working as catalysts in this boom. Major developments in medical and information technology research along with other scientific fields have given brilliant reports of their success.

Is Reducing Brain Drain the best solution?

If brain drain is not always bad, then limiting the movement of highly skilled people may not be necessary. Indeed, except for extreme cases, measures that restrict mobility are not the most effective responses to the causes or consequences of brain drain. In particular, measures aimed at reducing the recruitment of developing-country professionals in several sectors (notably health care but also in education) in some developed countries may only be a band aid solution — and a bad one at that — for several reasons.

The net economic effect of migration depends on the particular context. The possibility that emigration can have positive impacts means that, unless targeted at specific sectors in specific countries, measures to limit migration can end up doing more harm than good.

While brain drain may aggravate the shortage of skilled workers in some sectors in some countries, emigration may not be the fundamental reason for actual or anticipated shortages in the first place. Thus, tampering with mobility may not even start to address the structural problems faced by some developing countries. Increasing wages, improving working conditions, and providing employment opportunities may be a far better approach than restricting mobility — and it is in supporting these efforts that developed countries might be most effective.

Thus brain drain is not good nor bad until there is a balance in the flow of the professionals and educated people. India as a developing nation need people from other countries to flow in their country but at the same time need to give their human resource to others too. So till there is a balance between the inflow and outflow of human resource it is a Gain to the country.

People or countries may recruit our best mind promising them a stable job but taking away their chance to explore and become an entrepreneur and return something to the country.