India’s reverse diaspora

Residents of the South Indian city of Bangalore, once an orderly enclave of colonial-era buildings and well tended gardens, have started wearing earplugs to dampen noise from the maelstrom on their chaotic streets. It is the noise of growth boosted in part by the return of many of India’s technologists whose departure to the west was once bemoaned as a brain drain.

Call centres, software and engineering companies and some of the world's most advanced research centres prosper on the capital - both human and monetary - of Indian émigrés recently returned from abroad with foreign passports, foreign bank accounts and families sometimes more Western than Indian.

Bangalore's frenzy is emblematic of the reverse brain drain - or reverse diaspora - that helped propel India onto the world stage in ways that were unimaginable just a few decades ago. While Indians still go abroad to work and study - there are a record 80,000 Asian Indian students now enrolled in US universities - a new class of Indian expatriates, fluent in the ways of the West, energises India.

By several estimates, between 50,000 and 60,000 information-technology professionals alone have returned to India from overseas since 2003, most to the suburbs of New Delhi, Hyderabad and especially Bangalore, the nexus of what Indians call their "brain gain".

At Bangalore's new international airport, packed airliners arrive from London, Paris, Frankfurt and Singapore bearing Indians with degrees from the world's top universities and plans to reconnect to Mother India, whose economy has been growing at nearly 9 per cent annually until the recent worldwide financial meltdown. Some were recruited at job fairs in cities across the US, home to 2.32 million people of Indian origin. And most say they return to India for attractive pay packages that offer a comfortable standard of living comparable with life in the US along and greater opportunities of advancement. Others want to be closer to ageing parents.

But Bangalore, home to more than 1,000 information technology firms and 10,000 US dollar-millionaires, may price itself out of the market. While India’s technology and outsourced-services industries continue to boom, earning an expected US$52 billion in the 2007-2008 fiscal year, wage inflation in Bangalore runs at up to 50 per cent a year, making it only marginally less expensive for sophisticated tech work than doing business in California.

As a result, some global brand names shifted operations to cheaper Indian cities like Chennai, Kolkata and Hyderabad, where the costs of doing business are as much as 30 per cent less. A few companies are looking beyond India altogether, betting on lower-wage countries like Vietnam and the Philippines. Intel Corp., for example, says it will not significantly increase its 2,400-person staff in Bangalore, instead ramping up operations in Vietnam. And in what may be one of the most ironic twists in global outsourcing, several Bangalore-based technology companies have themselves outsourced operations to China and Mexico to tap cheaper labour pools amid the costly hiring situation at home.

If Bangalore is losing some of its lustre, it remains the world’s fourth largest technology hub and claims to have the fastest-growing wealth base in the Asia-Pacific basin. And for many Americans, this means Bangalore is both a threat and opportunity.

A threat because it now boasts at least 160,000 technology workers compared with about 175,000 in Silicon Valley. Moreover, much of this talent, especially at the middle and top levels, has been transplanted from the San Francisco Bay area to India.

Bangalore also represents an opportunity for US companies to tap into India's prodigious brainpower and entrepreneurial spirit. From Bangalore, Americans and citizens of other developed countries are having their tax returns prepared, CAT scans and MRIs read, mortgages analysed, lawsuits researched, airline reservations confirmed and computer glitches unsnarled - all at the speed of light, thanks to broadband internet connections that make the city as close as the shop or hospital next door.

As Bangalore moves further up the technology ladder, this four centuries-old city of nearly 6 million citizens has ambitions to challenge places like Silicon Valley and the Research Triangle at Raleigh-Durham, North Carolina, as a world centre for innovation. Microsoft plans to spend $1.7 million in India over the next several years and has opened a research centre there, following ones in Redmond, Washington; Cambridge, Massachusetts, and Beijing. IBM, Oracle, Cisco Systems, Intel, and Hewlett-Packard also have campuses and research centres in Bangalore staffed, in part, by returnees from abroad.

The corporate headquarters of Infosys Technologies Ltd., India's second-largest outsourcing firm, are tucked away in a section of Bangalore called Electronics City, which may be a slight misnomer considering the shantytowns and swarms of poor Indians living along its fences.