Trump will be a boon for India

President Donald Trump is tightening the issuance of H1B visas that have been used by large numbers of Indian engineers to work in the United States. A H1Bvisa is issued by the US Government at the request of an American company which says it cannot find the required skilled personnel within the United States hence needs to employ foreign workers. Many American companies are doing business of H1B visas.

They apply for H1B visas, bring in Indian engineers into the US, and then lend the services of these engineers to other companies. Trump wants to put an end to this practice. He has proposed that the principal employer requesting a H1B visa will have to disclose the name of the ultimate user of the services of the person brought into the US. This will restrict the ability of these companies to lend the services to any company that gives a high price for the services of the engineer.

Another change proposed by Trump is to restrict the issuance of work permits to spouses of H1B visa holders, which was available easily until now. Yet another change proposed is to eliminate the preferential issuance of H1B visas to dependents of H1B visa holders. All these measures are designed to reduce the flow of foreign engineers into the US.

These changes will hit India hard. Indian engineers are major beneficiaries of the H1B visas. Of the total 336,000 applications received in 2017, 248,000 were filed from India. China was at the second place with 36,362 applications.

Indian Government is concerned with this tightening of the immigration norms in the US. Foreign Minister Sushma Swaraj raised the issue with a visiting delegation of US Congressmen and Finance Minister Arun Jaitley brought it up with the US Commerce Secretary. Unfortunately, the Indian government is only looking only at the immediate loss to India from the monies repatriated by the engineers going to the US under H1B visas; and not looking at the benefits that can accrue to India from reduced migration of the engineers.

The restrictions proposed by Trump actually provide a golden opportunity for India to emerge as the global economic engine. In order to understand this, we first have to assess the impact of these restrictions on the US economy.

Bush and Obama were ‘globalisers’. They pushed for free flow of investments such as FDI from America to India; free trade in goods such as exports of cars manufactured in India to the United States; and free flow of manpower such as issuance of H1B visas and Green Cards.

They believed that the entry of skilled engineers from India into the United States will make US corporations globally competitive and that will lead to the creation of incomes and jobs in the US. These benefits did not flow to the people of the US though. Instead, Indian engineers were seen as taking away jobs from the US applicants. Thus, Trump has reversed the policy.

The restrictions on H1B visas and Green Cards will not help the US economy, however. These may create some jobs for the American engineers in the short run but the unavailability of skilled Indian engineers will hit at the global competitiveness of the US corporations, universities, and even research programmes like those of the National Aeronautics and Space Administration.

Here, lies the silver lining for India. If Indian engineers can help make American corporations globally competitive, why can they not make Indian corporations globally competitive? Instead of trying to ensure that Indian engineers continue to migrate to the US and continue to make US business entities competitive; the Government of India must think how to retain Indian talent in India and make India globally competitive.

It is strange that the Indian government is peddling the interests of those engineers who want to leave India, pursue their ‘American Dream’, and make America stronger vis-à-vis India.

The true challenge before the Government of India is to create conditions that provide employment opportunities for Indian engineers in India and help retain our talented engineers. The government must provide enabling conditions for multinationals and US universities to relocate to India. Trump can make it hard for Indian engineers to enter the US, but it is virtually impossible for him to prevent US corporations from relocating to India. Many US corporations have already made sizable investments in research centers in India.

It is only one more step for them to relocate their headquarters in India, or, as a second best alternative, to expand their presence in India. Trump will become our path to global prowess if we can create the enabling conditions for this. The loss of jobs and reduction in remittances due to the reduced migration of our engineers to the US will then be more than made up by the creation of jobs within India.

There will be more benefits to us in the downward linkages with the Indian economy in the flow of new technologies, supply of office space and services such as taxis and computers. Trump will become a golden opportunity for us.

The main reason why US businesses hesitate to invest in India and Indian companies lag behind in the global economy is infrastructure and the institutional framework. Roads, access to airports, uninterrupted supply of electricity and availability of high speed wireless networks are the basic requirements of infrastructure. The present NDA government has taken many initiatives in this direction and these indeed lay the foundations for the growth of foreign- and domestic service companies in India.

We are far behind in the social institutions though. Law and order is in dismal shape. Traffic is unmanageable. Petty crime such as snatching of gold chains is high in most major cities. Extortion by coolies at the railway stations is everywhere. Corruption is rampant.

Courts are habitually slow, very slow. These institutions are wholly in the control of the Government. Many of these such as extortion by coolies and slow pace of the courts are in the direct control of the Central government. Improvement in these institutions will enable India to become the global powerhouse for the supply of services such as education, health, software, cinema, translations, medical transcriptions, research and more.

The US economic dominance is based on the advanced technologies held by US corporations. Grants by the US government have contributed much to the development of these technologies. For example, the internet was invented under a grant by the US government. Trump has scaled back the grants for such research. That opens up another widow for us.

Our government must increase investments in research and make it easy for Indian corporations to access them. Trump will be a boon for India if we can play our cards right. Author was formerly Professor of Economics at IIM Bengaluru

By Dr Bharat Jhunjhunwala