How Americans benefit by bonding with India

The popular perception is that companies in India are taking jobs away from Americans but the numbers on the ground tell a different story.

In the last five years alone, 90 Indian companies have created 16,576 jobs in the US by investing $5.5 billion in new companies and saved over 40,000 jobs by making 372 acquisitions and investing $21 billion (for 272 deals).

These were some of the interesting findings of a recent study on How America Benefits from Economic Engagement with India by the India-US World Affairs Institute of Washington, the Robert H Smith School of Business, University of Maryland and the Federation of Indian Chambers of Commerce & Industry.

Authored by Professor Vinod Jain of the University of Maryland and Kamlesh Jain, director of research & education at the India-US World Affairs Institute, the study covers India’s foreign direct investments into the US and US exports to India, as well as an assessment of their impacts on the American economy.

Indian companies have been investing abroad, including in the US; with the rise of India Inc., the magnitude and impact of such investments have increased. Some Indian companies to which work was being outsourced earlier are now ‘insourcing’ such jobs within the US itself, using American workers to perform value-added work.

More than two-thirds of the $5.5 billion of the greenfield investments in the US were made by 10 companies: Essar Steel, JSW Steel, TCS, Welspun Group, Reliance Adlabs, Indage Group, HCL, Flag Telecom, RIL, and Tata Communications. Over 40,000 jobs were created or saved by 85 acquisitions (data for which was available); the number of jobs saved for 372 transactions would be much higher.

Between 2004 and 2009, US exports to India grew 269 per cent, while India’s exports to that country grew 136 per cent. US exports to India have grown faster than exports to all other countries. In 2009, India was United States’ 17th largest goods export market, and 15th largest supplier of goods imported into the US. Interestingly, in the 1700s, America traded more with India than with all of Europe combined.

The US exports high-tech products such as aircraft, electrical machinery, optic and surgical instruments, chemicals, plastics, pharmaceuticals, vehicles, and railway stock and traffic signal equipment. With the US-India civilian nuclear agreement, US exports to India are likely to grow even faster in the coming years, creating more jobs in the US.

Just manufactured exports to India were linked to 96,000 manufacturing and non-manufacturing jobs in the US in 2009, the study estimates. These numbers do not include agricultural, mining, and services exports, which have their own implications for jobs in the US. For instance, in 2007, the US exported services worth $9.4 billion to India, compared to the goods worth $15 billion that are the focus of this study.

The 2.57 million Indian-Americans also contribute to the US economy and society in many ways. According to a recent survey by the US Census Bureau, there were 231,000 businesses owned by Indian Americans in 2002, which employed 615,000 workers and generated over $89 billion in revenues. Indian immigrant entrepreneurs have founded more engineering and technology companies during 1995-2005 than immigrants from Britain, China, Japan, and Taiwan combined.

Currently, there are almost 10,000 Indian-American owners of hotels/motels in the US, who own 40 per cent of all hotels in the US and 39 per cent of all guest rooms, and employ over 578,600 workers. There are about 50,000 physicians (and 15,000 medical students) of Indian heritage in the US.

Education is one of America’s finest exports. The foreign students who come for higher studies to the US not only bring talent, but also contribute to the US economy via tuition and living and other expenses. India has had the largest number of foreign students in the US among all countries of origin for eight years in a row. In 2008, there were 94,563 students from India, who contributed $2.39 billion to the US economy.

The other benefits of engaging with India include noble laureates like Har Gobind Khurana (Medicine, 1968), Amartya Sen (Economics, 1998), CEOs in several corporations like Indra Nooyi (PepsiCo), Vikram Pandit (Citigroup), educators like Pradeep Khosla (dean of engineering, Carnegie Mellon University), Nitin Nohria (dean, Harvard Business School), and journalists like Fareed Zakaria (editor, Newsweek), to name a few.