On March 26th, the Wall Street Journal reported that IBM plans to cut nearly 5,000 jobs in the US and move many of them to India. Many other multinational corporations are also considering this option. India offers lower wages – a skilled engineer in India, for example, may cost about 20% of his/her counterpart in the US – and reduced operating costs.

While India’s economy has been negatively impacted by the global recession, it is still projected to grow by around 6% in 2009 (down from an average 9% growth during the past three years). This relative strength in the economy and increased hiring by multinationals in India has caused a “reverse brain drain” phenomenon.

During the past decade, Indians have made up nearly 20% of the foreign student population in the US. Many of these students have planned to continue working in the US or other Western countries, rather than return to India. Given the world economic climate, however, experts estimate that as many as 120,000 skilled Indians will return to India in search of employment over the next few years. There is also evidence that there are now significantly fewer individuals with undergraduate degrees from Indian schools applying to foreign grad schools as compared to previous years. Many are instead choosing to attend local Indian schools.

It is never easy for companies to cut jobs at headquarters in their home countries. However, India offers the opportunity for struggling companies to maintain efficiency and profitability without reducing talent. IBM has even initiated an assistance program to help laid-off US employees relocate to other countries in order to retain their jobs. While this program has not yet been very successful, some companies may find that employees from Asian countries like India or China may be more willing to return to their home countries under such incentive programs.