The Impact of Brain Drain on Indian Economy

No Indian institute has been able to get into the top 100 of the QS World University Rankings 2021. This is one of the prominent reasons to why there has been a large amount of brain drain from India. The mediocrity of Indian institutions has led to good brains fleeing away from the country. And like everything else, it has an impact on the Indian economy.

According to Reserve Bank of India, spending on education abroad by Indian students was $2.8 billion in 2017-18. Imagine if that money was invested in India. It could have made the demand-supply chain move a lot faster and would have helped many to get an employment as one man’s spending is other man’s income, benefitting the whole economy in that process.

Ruchir Sharma, a global investor, points out in his latest interview with NDTV, “if you look at the new companies rising in India… a lot of them have relied on foreign investment to grow…. and we have not seen the growth of too many domestic billionaires.” This is the direct result of the Indian state meddling with the prospective ‘good billionaires’ thanks to the inspector raj, complex taxation and strict regulations. If we do away with this, it would have three implications. One, it could bring wealth into the country. Two, it would bring brilliant minds in the big tech companies. Three, we can reduce the amount of brain drain and increase brain gain.

But, there is more to why the finest brains in India tend to study abroad. Amit Varma tries to explain the causes by using Michael Kremer’s O-Ring Theory in his article ‘Why Abhijit Banerjee Had to Go Abroad to Achieve Glory’. He writes, “Imagine a task that requires ten people to fulfill certain functions. Let us say that each of them functions at a high overall skill level of .99 (where 1 is perfect.) The overall level of the task can then be quantified at 9.04. If they all perform at .95, though, the overall level drops to 5.99. If they perform at .9, it drops to 3.49.” This implies that “capital chases quality” and “talent tends to congregate in clusters.” What this means is people like Abhijit Banerjee goes to elite universities like Harvard, because they get brilliant peers which amplifies their skills. They get to rub shoulders with the best in the business.

The exact impact of brain drain on India’s economy can’t actually be calculated in real terms, but surely it is huge. I think we need to start from the scratch to stop it from hurting us. We need to make a room for private investment in primary as well as higher education. Ease of doing business will also play a huge role. This requires many reforms and efforts from politicians and bureaucrats and university leaders. This all reminds me of an old cliché, there ain’t no such thing as a free lunch.

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