September 9, 2007

The US should have a special ......

The US should have a special ‘Thanks giving day’ for India, looking at the manner in which premier Indian Institutions have been supplying talented manpower to them, absolutely free of cost!!!
I repeat, absolutely free of cost! And from a pool of amazingly brilliant students across India! For long I have been advocating the fact that the Government of India should levy a tax from all those students of the country’s premier institutions who go overseas and join various global corporations. In fact, I’ve also been advocating that not only such students, but also the companies hiring them should pay a tax for recruiting students from premier technology and management schools of the country. And so it was good news when recently a Parliamentary Standing Committee of the HRD Ministry recommended that students from many of the premier institutes of the nation – predominantly those which run on substantial state subsidies – should be levied some sort of tax (a ‘graduate tax’ or an ‘exit tax’) if they take up overseas jobs. This would also apply to the organisations that recruit such students, whereby they would be levied an annual tax for recruiting manpower from the country. Well, for many it might seem to be a retrograde step in this era of globalisation when we talk about free movement of goods, services and manpower, but then such a tax is a logical imperative, considering the dismal state of education infrastructure in India.

But even before I come to the state of education infrastructure of the country, I fail to understand why, in the first place, should the tax payers’ hard-earned money, which goes into subsidising the cost of education of the students of these premier institutions, be squandered by letting them go to enrich bottom-lines of foreign companies in a foreign land? Considering the cost that the Government of India incurs in educating an IITian – around Rs.20,00,000 (and another Rs.12,00,000 to Rs.13,00,000 if they end up doing a post-graduate management programme in any of the IIMs and making most of their engineering education redundant, which is true in most cases) – and also that all this comes from the tax payers’ money, it is ridiculous to let them go without letting them pay up for the subsidised education. The same holds true for students of other premier institutes as well. To an extent that though the poorest of the poor of this country might not contribute directly, they still do so indirectly (in the form of indirect taxes), then why should their money, instead of being spent on their basic wellbeing, be spent on those who, at the first chance, would want to exit this country after availing of all the benefits from it?

Secondly, it is no secret that for any business to sustain and grow, the most critical resource is human capital. And when these global multinationals come hunting for the same in India, why should they be allowed to shop for free for this all-critical resource? It is even more ridiculous to allow this at a point in time when the Indian economy is on a growth trajectory and most of the Indian companies are starving for talent! Thirdly, to levy a tax is also logical simply because the state of primary and secondary education in the country is in a dismal state of affairs! Taxing would enable mobilising revenues to create more centres of academic excellence, which can feed talent in a sustained manner to the talent starved India Inc.

Now the question is, what should be the ideal tax structure? Logically, the ‘graduate’ or the ‘exit’ tax should not only cover the entire subsidy, but along with it the interest component on the amount that remains invested on such students till they graduate. Moreover, any investment in education provides returns over the entire lifetime of any individual, so a proportion of minimum 5% should be earmarked as a contribution by the government towards them. And as far as the hiring companies are concerned, they know the value that each and every employee adds to their existing businesses; a proportion of that value could be earmarked as tax on an annual basis. It is not that India would be the first country to levy such taxes as there are other countries who have done similar. But then we have more pressing reasons for such taxes. Given our sickening performance in the social sector (health, education and employment), it is nothing less than being ludicrous to first let our talent leave to the developed world just like that and then not to charge a tax on it.

Finally, the tax – if and when applied on the exiting students and the overseas companies – can become a positive step only if it is applied in the right manner. It has to be remembered that the ultimate aim should not be to merely impose an ‘exit’ tax, but more than that, to create a mechanism to make sure that in the future they would prefer to stay back instead of making the ‘exit’ a habit! Till then, I’ll wait for the India Thanksgiving Day in the US to become a reality...

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