India’s Brain Drain

Careers, code and culture: how India’s diaspora is transforming the digital world.

(Picture source: CRS Photo / shutterstock, 2017)

India’s diaspora is scattered across the globe. After generations of migration, around 35 million people of Indian origin now live in roughly 200 countries worldwide. This represents a doubling since the turn of the millennium, driven mainly by labour migration to the wealthy Gulf states.

In some countries they make up a significant share of the population: in Fiji, Guyana, Mauritius and Suriname, people of Indian origin account for around 40 percent of the population. In Malaysia, South Africa, Sri Lanka and Uganda they form important minorities, and in some places they dominate key sectors, such as the diamond trade in East Africa.

Taken together, the income of the Indian diaspora amounts to around 20 percent of India’s total economic output – in a country of more than 1.3 billion people. Indians abroad therefore have a major impact on prosperity in their host countries, while at the same time acting as a “living bridge” back to India.

The diaspora holds a special place in Western industrialised countries such as Australia, Canada and the United States. In addition to highly skilled professions, many Indians also run small businesses – almost half of the roughly 146,000 convenience stores in the United States are operated by Indians. After the Second World War, India, alongside other South Asian countries, sent migrants to help rebuild the Netherlands and the United Kingdom.

Qualified migration to the West

The Indian diaspora in the West is characterised by a high level of education and an important contribution to local economies. Many work successfully in knowledge-intensive professions such as mechanical engineering, IT, medicine, business administration and accounting.

In the British healthcare system they play a key role: around six percent of NHS staff are of Indian origin. In the United States, around the turn of the millennium some 38,000 doctors of Indian origin were already practising, around five percent of the total workforce. They also accounted for about ten percent of medical students. Today, around 99,000 doctors born in India are practising in OECD countries.

India’s influence is most visible, however, in the global IT industry. Around the year 2000, of 18,250 foreign IT specialists coming to the United Kingdom, about 11,500 were from India. In the San Francisco Bay Area, Indians make up 16.4 percent of the population and are one of the most successful immigrant groups. Many have become wealthy entrepreneurs and millionaires.

The incomes of people of Indian origin are significantly higher than the US median. Two-thirds of foreign-born Indian Americans hold a university degree – three times the share in the US population as a whole. Around 44 percent work in managerial or professional positions. By the turn of the millennium, the total value of their businesses had already reached about 235 billion US dollars.

Figure 1 Indian population in San Francisco: Distribution of the Indian population in the San Francisco Bay Area, 2019 (image source: localnewsmatter.org, 2022)

The Birth of the “Computer Indian”

India’s IT industry emerged from a mix of smart political decisions and, even more, lucky coincidences that reinforced each other over decades.

When India became independent in 1947, policymakers realised that the country suffered from an acute shortage of engineers, doctors and scientists. By founding the first seven campuses of the Indian Institute of Technology (IIT), they laid the foundations for a technical elite. Today India runs 23 IIT campuses plus two overseas branches in Tanzania and the United Arab Emirates.

Admission to these institutions follows meritocratic principles and remains extremely competitive. It is so competitive that an estimated 400 million US dollars a year flow into a huge coaching industry that prepares students for the entrance exams.

Those who get a place do not necessarily come from wealthy, privileged families. Around 80 percent of students come from India’s middle class. Many of those who were not admitted instead went to the United States to study – and most of them stayed. They found jobs in the emerging US IT industry. Those who followed in the 1960s and 1970s often already held academic degrees, which opened doors for them in renowned companies such as IBM, Boeing, Bell Labs and DuPont.

Their technical expertise, familiarity with Western corporate culture and proficiency in English allowed them to integrate quickly. Over time, they rose through the ranks.

The Indian diaspora builds bridges back to the Indus

In India itself, there was at that time no independent software industry. Computer hardware, including operating systems, was supplied by Western companies such as ICL and IBM. However, large Indian companies and public institutions needed customised software solutions that went beyond standard packages.

They therefore built up their own programming teams, which handled everything from installation to adapting the software to specific needs. As these companies grew, their teams accumulated more and more know-how and eventually began to develop their own programs.

The first company to actually export software solutions was Tata Consultancy Services (TCS), founded in 1968. After serving initial clients in the domestic market, TCS received its first major international contract in 1973: developing software solutions for the electricity sector in Iran.

A computer industry shaped by chance

For a long time, India relied on mainframes imported from abroad. The government imposed prohibitively high tariffs of up to 300 percent on hardware. IBM responded by shipping mainly old and refurbished machines to India.

In 1977, the Indian government forced multinational corporations to reduce their stakes in Indian subsidiaries to below 50 percent and to sell the remaining shares to local investors. IBM refused to comply and withdrew from the market altogether. Indian programmers, trained within domestic companies, stepped in to fill the gap.

The government later lowered tariffs in the hope of boosting revenues through re-exports, but import policy overall remained unfavourable. Even so, India was the only developing country to build a significant software industry, which initially exported 12 million US dollars’ worth of services. With the rise of the personal computer (PC), imports finally became more affordable and the software industry gained clear momentum.

Figure 2 Indian Institute of Technology Roorkee: The James Thomason Building Dome, the main building of IIT Roorkee. (image source: Aseem Mehta, 2024)

India’s IT Gurus

As fast as India’s software industry grew, it quickly came under pressure again. On top of high import tariffs came an acute shortage of skilled workers: the university system offered hardly any IT courses and produced too few engineers.

In the late 1970s, an unusual scene could be seen on India’s streets: two young men on a scooter, one at the handlebar, the other with a computer on his lap. In the evenings they set up the machines in rented rooms and held training sessions – passing on what they themselves had learned in courses during the day.

In 1981, Rajendra Singh Pawar and Vijay Thadani, both graduates of IIT Delhi, founded the National Institute of Information Technology (NIIT). Just a year later, the company was running branches in Mumbai, Delhi and Chennai. Through a franchise model, NIIT expanded rapidly – and earned itself the nickname “the McDonald’s of the software business”. Around the turn of the millennium, international locations in the United States were added, and NIIT broadened its portfolio to include digital learning platforms and training programmes for employees of large corporations. In 2024, the company generated revenues of around 38 million US dollars.

From the 1980s onwards, government policy also became more open towards entrepreneurship. It gradually strengthened IT education and eventually helped create an independent industry. Today this sector comprises around 2,800 companies as well as 2,100 development and innovation centres of international corporations and a vibrant start-up ecosystem – with total revenues of about 300 billion US dollars and almost six million employees.

Diaspora support

At first, Indians living in the United States tried not to put their ethnic background in the spotlight. They consciously avoided working with fellow Indians and instead concentrated on building careers within their own companies. They hardly noticed the progress of the IT industry back in India. Nor did they invest much in the domestic sector – early, hesitant attempts to re-establish themselves in India quickly failed due to bureaucratic hurdles. Their role was at best limited to that of individual mentors.

In the 1980s, software exports still meant physically sending a programmer, who travelled to the client with a floppy disk in his luggage – the practice known as “body shopping”. The wage differences were huge: companies paid 16,000 to 24,000 US dollars for an Indian software developer, compared with up to 95,000 dollars for an American counterpart. Compared with other emerging economies, Indian developers had a decisive advantage: English was their working language.

This route brought several small Indian firms into Silicon Valley as low-cost software contractors. Some Indian-origin managers, who had by then worked their way up into senior positions there, were willing to help. Yet they found the work of their compatriots unsatisfactory: their development tools seemed outdated, and their computers did not meet American standards – the Indian government at the time was promoting Russian rather than American computer technology. India’s IT sector was still at the very beginning of the personal computer era, and it simply could not meet American expectations.

Even so, the diaspora did not give up on their compatriots. Within their US companies they set up dedicated programmes in which Indian programmers could work with American technology – but at Indian wages and expense levels. Indian American executives coached and mentored them to raise their quality and performance standards to their own level.

The defining 1990s

At first, Indians living in the United States were regarded as excellent technologists, but in the 1970s and 1980s they still lacked experience in client-facing roles and corporate management. A decade later, some of them had risen to CEO positions in major companies and had acquired the full skill set of the IT industry. Around 40 percent of Silicon Valley start-ups in the 1990s had at least one co-founder of Indian origin; by 2004, Indians owned around 600 to 700 firms there.

But new immigration laws made it harder to have Indian IT qualifications recognised in the United States – or even to enter the country for short business trips. Regulations also forced US firms to pay guest workers at American market wages. That made it far less attractive to bring Indian software engineers into the country.

Yet as early as 1985, Texas Instruments had opened an office in India with a satellite link to the United States. The state-owned Indian Telecom Company allowed a 64-kilobit-per-second data connection. That may sound negligible today, but it opened up entirely new business models for software exporters.

India’s IT sector adapted quickly. Over time, more and more companies shifted to a mixed model: some programmers remained in India, working as a back office according to the specifications of their US clients. For American firms, sourcing work this way remained cheap. Exports boomed, rising from 128 million US dollars in 1990 to 485 million dollars in 1994.

The new millennium arrives early for India

Ironically, it was a programming flaw from the early years of computing that gave India’s IT industry its final breakthrough. To save memory space, many programs stored and processed years using only two digits – the decade and the year. No one had expected these systems to remain in use until the turn of the millennium. Instead, new versions were simply built on top of old ones, while the flaw remained untouched.

As the year 2000 approached, it became increasingly clear that these programs could not process the year “00” correctly – the Y2K bug. For US companies, the problem was acute: they needed software engineers who knew COBOL. In the United States, however, COBOL had long since become obsolete and had disappeared from university curricula.

In India, the opposite was true. Most curricula still relied on COBOL. That gave Indian developers a decisive competitive advantage and opened the US market to them on a previously unseen scale. Their smooth handling of Y2K projects built trust with American clients – and opened further doors.

The dot-com boom did the rest. Canada, the United Kingdom and the United States sharply increased their immigration quotas because they needed thousands of new programmers. A new wave of migration by Indian software engineers followed.

A cross-border community

As the Indian diaspora grew in the Anglophone world, India’s own IT sector was taking shape in parallel. The engineers who had moved to the United States in the 1960s were by then occupying senior leadership positions in medium-sized and large companies. Many of them were alumni of the same prestigious Indian universities as their peers who had stayed in India. They began to build networks – and founded organisations such as The IndUS Entrepreneurs (TiE) and the Silicon Valley Indian Professional Association.

TiE began as a mentoring network for young IT professionals from India in the United States, but soon evolved into the world’s largest network of Indian professionals. Today, TiE has dozens of local chapters and a global community of hundreds of thousands of members. The network has also exerted considerable influence on India’s IT industry and on government policy in New Delhi. TiE co-founder Kanwal Rekhi, for example, advised the Indian government on liberalising and modernising the technology and venture capital sectors.

The Returnees

This international community now watched India’s IT sector with growing interest. Wherever Indians rose to senior positions in their companies – notably at giants such as IBM, General Electric or American Express – contracts began to flow to India and investment followed to the subcontinent. This US-led outsourcing wave drove annual growth in India’s software industry to around 40 percent in the 1990s. By the turn of the millennium, India’s IT export industry was worth twelve billion US dollars.

Young Indians started returning from the diaspora to India. Some founded their own research and development labs; others managed US investments, Indian subsidiaries and cross-border service contracts – for example at the IBM India Research Laboratories. Many soon became entrepreneurs themselves, founding companies such as Cognizant, Techspan and Mphasis or investing in young IT and dot-com firms. A vibrant venture capital and start-up scene emerged – and its volume exploded from 24 million US dollars in 1996 to 480 million US dollars in 1999. In this way, the diaspora assumed a dual role: it helped build India’s domestic IT sector while serving as a bridge into the US market.

Figure 3: India’s software exports (in billions of US dollars)

The dot-com bubble doesn’t burst India’s IT sector

Around the year 2000, the dot-com bubble burst. Companies had poured huge sums into fixing the Y2K bug, and these expenditures weighed heavily on their budgets. When investors started asking for returns, there were no marketable products to show. Soon after, the telecoms bubble burst as well. It left behind a vast global telecommunications infrastructure – but demand collapsed, and prices fell to about a tenth of their level in the previous decade.

In India, the industry proved remarkably robust. By 2004, the country had about 656,000 IT professionals, and each year some 73,000 new graduates were leaving university – more than half of them found work in the IT export sector.

India used its head start strategically and became one of the most attractive locations for companies looking to offshore their IT processes. The 10 to 12 hour time difference with the United States made overnight delivery possible: US firms could in effect run double shifts in a single working day and expand both their internal processes and their customer support.

The numbers speak for themselves. In 1997, the IT industry contributed 1.2 percent to India’s GDP; by 2003, this share had tripled to 3.6 percent. Around 62 percent of the sector’s value added went into exports, accounting for 21 percent of India’s total exports. Today, ICT and related services regularly make up more than 50 percent of India’s service exports.

India now also plays an important role in global research and development. This was anything but guaranteed: in Indian tradition, knowledge is something teachers – so‑called gurus – are expected to pass on freely to their students. That mindset sometimes brought Indian firms into conflict with the intellectual property regimes of their US clients.

In response, many US companies have adopted a pragmatic solution. In back‑end offices in India, local specialists draft most of the patent applications, which are then revised and formally filed by US lawyers. This model can cut companies’ patenting costs by 50 to 60 percent.

Figure 4 Why Indians return home. Source: [1]

The role of the diaspora

Many Indian Americans tend to downplay their own role in the success of India’s IT sector. And indeed, Indian developers did have genuine structural advantages over peers in other emerging economies with only rudimentary software industries, such as Russia or Brazil: cultural proximity to the English‑speaking world and English as their working language.

But that alone does not explain India’s success. South Africa and Pakistan shared many of these advantages – and both also had sizeable diasporas. Yet they benefited far less from the internet boom and the Y2K opportunity than India did.

The real difference was made by Indians abroad. At first they took on mentoring roles for inexperienced Indian programmers, laying an initial foundation of trust in their skills. Over time, they also persuaded decision‑makers in US corporations that India was a reliable location for outsourced business processes.

Something similar could be said about Indian doctors, who play an equally indispensable role in the healthcare systems of English‑speaking countries – in both rural and urban areas. But that is another story. The Indian experience suggests that even a relatively small number of expatriates can fundamentally reshape the development path of their home countries.[2]

Further Reading

[1]	Indiaspora, „India & Its Diaspora: Partners in Progress. Supporting India's Journey to 2047,“ Indiaspora, San Francisco, 2026.
[2]	A. Pandey, A. Aggarwal, R. Devane und Y. Kuznetsow, „The Indian Diaspora: A Unique Case?,“ in Diaspora Networks and the International Migration of Skills. How Countries Can Draw on Their Talent Abroad, Washington, World Bank, 2006, pp. 71-98.