PM Modi is exporting India’s labor as countries slow immigration

Hello, this is Priyanka Salve writing from Singapore.

Welcome to the latest edition of Inside India. A one-stop destination for stories and developments in the world’s fastest growing large economy.

Over the past decade, China has reversed its brain drain, bringing thousands of skilled workers back to their home countries and fueling its rise as a technology powerhouse.

India is taking the opposite approach. The company is sending more young workers overseas. This week, we unravel why India has signed mobility agreements with several trading partners despite rising anti-immigrant sentiment around the world.

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Labor mobility agreements are a common feature of many of India’s recent agreements with trading partners, from Europe to New Zealand and Russia to the Middle East.

A lack of opportunities for highly skilled workers in one of the world’s largest working-age populations, as well as India’s increasing dependence on remittances to fund its finances, has led the government to seek to secure labor overseas.

Unlike China, which has become a manufacturing powerhouse with massive job creation, India has not fully addressed the “significant challenge of an unemployment rate hovering around 5-6%,” Jayanth Krishna, senior fellow and chair of India and emerging Asian economies at the Center for Strategic and International Studies, told CNBC.

“When you add in underemployment, the rate jumps alarmingly,” Krishna said, adding that India is responding to “the aspirations of an ever-expanding working-age population” by placing skilled and semi-skilled workers in overseas markets.

India’s government has become increasingly reliant on remittances sent home by overseas workers, receiving the world’s highest amount of remittances, around 3% of gross domestic product (GDP), experts say.

But the policy is not without resistance, especially at a time when anti-immigrant sentiment is on the rise around the world. Last week, New Zealand Prime Minister Christo Luxon praised the country’s free trade agreement with India, which also increases labor mobility for Indian workers.

“You have enriched our country economically, socially and culturally,” Luxon told a crowd of Indian diaspora in Auckland. However, the deal faces strong opposition from members of the Luxon provincial government’s coalition government as it awaits final approval from parliament.

In a post on X, the country’s Foreign Secretary Winston Peters said the trade deal with India would create an “unprecedented immigration environment” and make it difficult for “Kiwis to find work”. A few months ago, Shane Jones, a Luxon government minister and member of Mr Winston’s New Zealand First party, said the deal would create a “butter chicken tsunami” for New Zealand.

Prime Minister Modi’s recent visit to Australia, where India overtook Britain as the top foreign-born Australian last year, also sparked anti-India protests. According to local media reports, Australian social media personality Hugo Lennon heckled Modi in Melbourne, shouting, “We don’t need any more Indians! This country belongs to Australians.”

Meanwhile, the United States, one of the largest recipients of Indian workers, has tightened visa rules even as trade deal negotiations with New Delhi are underway. The US government’s move only gave India further incentive to enter into labor migration deals earlier this year to export workers to Russia, Israel, the European Union and Finland.

The United States created the H-1B visa in 1990, and it is frequently used by major American technology companies to attract highly skilled workers from abroad. India has so far been the largest recipient of H-1B visas, but the Trump administration is seeking to significantly reduce the country’s dependence on the program.

India has observed the evolution of U.S. H-1B politics and “drawn a clear lesson that the diaspora’s access to overseas labor markets should not be held hostage to other countries’ domestic politics,” Ronak D. Desai, a visiting fellow at the Hoover Institution at Stanford University, told CNBC.

“Treaty-based movement is politically much more durable than movement granted by unilateral visa policies,” he added.

India’s move to export labor is in sharp contrast to its billion-person neighbor China, which has seen an influx of returnees over the past decade, partly due to geopolitical tensions that led to the expulsion of Chinese scientists from the United States.

According to the Boym Institute, a think tank, China has a term for this phenomenon: haigui, which literally means “return from across the sea.”

Experts said that “Haigui” is sowing seeds in the semiconductor, biotechnology and artificial intelligence fields, adding that the Chinese government has also created domestic capacity to absorb this highly skilled talent.

“Experts with portable skills are invaluable in helping China advance technologically,” Rafik Dossani, a non-resident senior economist at the RAND Corporation, told CNBC.

Although the Chinese government is offering incentives for both repatriation and infrastructure development, India lacks the capacity to foster the development of advanced technologies such as artificial intelligence, he added.

India spends about half of 1% of its GDP on research and development, lower than the global average of 1.7% and significantly lower than the more than 3.5% in the United States.

The Modi government does not see a “brain drain” as a major concern because India does not have similar opportunities, said Pramit Chaudhry, head of South Asia at Eurasia Group.

Rather, they are choosing to promote it, he added.

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