Imagine a new state with about 20 million people-a population equal to that of Haryana-joining India. Its people descend from Indians coming from all regions, religions, and castes, including the offspring of indentured labourers, unskilled workers, farmers, businessmen and educated professionals. They are almost fully literate, with a per capita income exceeding $15,000. They run several of the world's largest banks, airlines, consulting and accounting firms, the most prestigious high technology companies, teach in the best universities,and excel in science, engineering, and software. The new state produces goods and services worth more than $300 billion annually, or about twothirds of the entire output produced by the one billion people living in India today.

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GROUND REALITIES » The expertise and business acumen of the diaspora can help transform India into a major exporter of services. » Indian business must set up a code of conduct and raise its own standards to attract more investment. » Educational an research bodies should rework their procedures to draw ethnic scholars from abroad.

This imaginary state describes the Indians, and their descendants, who live outside India. The Indian diaspora thrives in all corners of the world where it is typically better educated and wealthier than the local population. It is heavily represented in the emerging technologies driving the economies of developed countries, contributing disproportionately to the world's prosperity. The growing pool of talent that India exports to the rest of the world enriches other countries but does it help India as well? The answer depends largely on whether India is ready to take advantage of its distant kin.

Emigration from India used to be considered a "brain drain" but reality is more complicated. Most people who left India were neither wealthy nor well educated until recent times, and many who succeed abroad would likely have failed or attained mediocrity at best had they stayed home. Even in historical times, India's inability to develop and fully utilise the talents of its population spurred many of its energetic people to seek better opportunities outside. For example, Indian mathematicians created the decimal system about 1,500 years ago. Soon afterwards, Indian astronomers and mathematicians emigrated to Baghdad, the Silicon Valley of the time, to work in the courts of Arab rulers, developing mathematical applications. Those who left India correctly judged that foreign rulers and institutions would give them greater scope and opportunity to develop than those at home. The fruits of their labour ultimately passed from the Arabs to the Europeans, which quickly saw the superiority of a decimal system over Roman Numerals. Medieval Indian scientific and mathematical knowledge helped the world but did very little for India.

Is India fated to export talented people, often after giving them a highly subsidised education, for the benefit of more developed countries but not itself ? Fortunately, the example of the IT sector shows that ethnic Indians abroad can help both India and the world. Indian IT would not have developed had Indians not gone abroad to study and work. Today, the IT sector exports more than $6 billion, boosting foreign exchange reserves and creating well-paying jobs in the private sector. It benefits from government investment in education but is run by the private sector and is not politicised like most industries. It is open to foreign investment and closely connected to ethnic Indian-run companies, venture capital funds and businessmen in other countries. Its success helps legitimise the capitalist pursuit of wealth in India, for people see that the new IT millionaires earn their money through enterprise and not corruption and connections.

Thesuccess of ethnic Indians abroad has political implications. The prosperous businessman, doctor and software programmer is replacing snake charmers and corrupt bureaucrats as the image of India. India is now known not just for poverty but also for technological prowess in certain fields. Ethnic Indians are becoming an increasingly effective lobby, especially in the US, on India-related matters, a welcome improvement over diplomats.

India can take advantage of the skills and knowledge of its diaspora or block access to it through restrictive laws, regulations and attitudes. If Indians prosper in other countries with open, fiercely competitive market economies, often rising to the top, what prevents the one billion people in India from succeeding just as well? Faced with competition, why do Indian businessmen seek shelter behind tariffs to preserve their inefficient practices when their diaspora counterparts succeed without them? Why do many Indians remain insecure about truly opening their economy to multinationals when an increasing number of them are run by diaspora Indians? Why do Indian students go abroad for an expensive first-rate education in universities full of Indian professors teaching them? Why cannot Indian universities, other than a handful, offer such quality education?

Services, including IT, media, research, education and healthcare, now drive economic growth globally. Diaspora Indians link the Indian to the global service sectors. Their expertise and business acumen could transform India into a dominant exporter of services just like overseas Chinese helped transform China into a global exporter of goods. That can only happen if India reforms rules and practices in each sector to dismantle the barriers keeping diaspora Indians away. It means tackling the vested interests that deter the diaspora from building more schools and universities, setting up medical facilities, and investing in India.

A recently established business school in Hyderabad is a rare successful example of the potential contribution of Indians abroad. It is also the exception that proves the rule. Most attempts to set up institutions of higher education involving foreign partners have been blocked by a lethal combination of bad rules, political resistance, and professional jealousy.

It is not enough, however, to create a few elite institutions or open a few sectors like IT to the global market. India needs to act boldly, pushing for liberalization of services at the global level and working with ethnic Indians abroad and other governments to lower trade barriers and strengthen business practices to attract more investment.