Go forth and multiply (income)

The initial wage gap for workers migrating out of India, estimated by the World Bank at over 100% on average, makes it a one-way street. The subsequent growth opportunities are also relatively higher, especially for migrants who can make the transition from low-skilled employment to high-skilled employment in their host country. The scope for such transition is greater in advanced economies, with a broader range of immigration requirements. This influences the reverse flow of migrants, which is higher in West Asia than in OECD countries. However, the principal determinant in a migrant's return remains the wage differential, which is not closing as fast for low-skilled jobs as it is for those involving higher degrees of skill.

For an economy that is the world's biggest recipient of remittances, the policy objective would be to improve the skills of a larger proportion of its workforce. This accomplishes the dual objective of domestic industry being able to absorb some of these skills while those exported are also less likely to be stranded abroad due to wage arbitration. The broader objective would be accelerating low-skill income growth at home through high-skilled manufacturing and services. The second-order effects on intermediate and low-skilled employment can be impressive.

The pace of India's economic growth has to be sustained at high levels to match the gains made by its migrant workers. A worker staying back will need over two decades of economic growth to match the income gains made by a colleague who migrates. This gap can only be closed by targeting GDP growth rates in the region of 10%. The developing economies that have sustained such growth rates have all been export-led. That model may no longer be workable given the manufacturing capacities that China has built, but India can experience a growth spurt with services thrown in. Even as more people leaving our shores does make for a quicker, wider spread of the 'Indian way' of dealing with the world.