By Amit Kapoor and Mohammad Saad
One of the most contentious policies of the Trump administration was just announced: a $100,000 fee to apply for an H1B visa. Naturally, the announcement unsettled the Indian diaspora and many prospective Green Card applicants in India, since over 70% of H1B visa holders are Indian, with many of the brightest among them likely contributing to the development of foreign AI systems and large language model companies. The White House promptly reassured existing H1B visa holders, though, by making it clear that the $100,000 fee would only be charged to new applicants, not to those who already had one. Since then, the action has generated discussion about its possible advantages and disadvantages for national interests, with some applauding it as a step to stop the long-standing “brain drain” phenomenon. While preventing brain drain is directly relevant to the global AI race, retaining domestic talent alone does not fully address India’s AI challenges.
From an objective standpoint, Trump’s decision to significantly raise H1B visa costs will inadvertently slow down the flow of some of India’s most talented individuals to the West, something India has long failed to stop. The large immigration to the United States was driven because of what America could provide but India was unable to—merit recognition, better infrastructure, better education, and cleaner air. Numbers speak for themselves, consider for instance that at the national level, India’s Central Sector Scheme of Scholarships for College and University Students awards a maximum of 82,000 scholarships annually for graduate and postgraduate studies. In contrast, the United States awards more than 1.7 million private scholarships and fellowships annually, valued at over $7.4 billion as of 2020. Now consider infrastructure, education, and pollution: In the 2024 infrastructure rankings by the World Population Review, the U.S. was ranked 7th, while India ranked 28th. According to the latest QS World University Rankings, the U.S. has 192 ranked universities, including 44 in the top 100, whereas India has only 54 ranked universities and none in the top 100. Last year, India’s capital was ranked the most polluted city in the world. A Transparency International report released in 2024. Collectively, these factors have incentivized India’s most talented workers to contribute to the U.S. economy, rather than to India’s own development.
In light of the AI revolution, which makes it crucial for countries to protect their interests and seize new opportunities: something that is impossible without the right human resources, the loss of India’s brightest minds becomes even more pressing. Naturally, a lack of talent could further disadvantage India, which was already far behind in the global AI race. Inadvertently, Trump’s move could allow India to keep more of its skilled workforce, which could lead to a chance to take a more active role in the AI race. However, this must definitely not invite unwarranted optimism as India’s capacity to take full advantage of this opportunity is still constrained by the same elements that drove talented people to relocate to the United States: infrastructure, funding for research, and a favourable business environment.
To make the point clear, one must first realize that creating AI systems necessitates a large investment in R&D. Regretfully, neither the public nor private sector of India invest much in research and development. The private sector makes significant investments in countries that have successfully developed AI systems, but the government cannot be held entirely responsible. As a percentage of GDP, India’s R&D spending has stayed between 0.6% and 0.7%, which is less than the global average and less than that of nations like the U.S., China, and South Korea. Furthermore, only roughly 36% of India’s total R&D expenditures come from the private sector, compared to over 70% in these other countries. Low R&D investment in India means that retaining talented individuals does not automatically translate into the creation of AI systems. The fact that AI innovations typically originate from startup ecosystems that promote entrepreneurship is another crucial point. India has yet to establish such an environment. For instance, take the corporate tax system in both countries: The Tax Cuts and Jobs Act of 2017 established the 21% flat rate in the United States. All corporate income brackets are subject to the same rate. In contrast, corporate taxes in India range from 25 to 30% plus additional surcharges. Businesses are further burdened by the intricacy and ambiguity of India’s tax laws, especially smaller ones that cannot afford professional advice. Delays and a lack of transparency in tax administration are examples of inefficiencies that can increase mistrust and encourage tax evasion. The favourable business climate in California undoubtedly aided the Indian talent who migrated there in establishing their businesses, but it looks unlikely that India would provide similar opportunities for some time to come.
Another possible effect of Trump’s decision is that India could experience a temporary decline in wages instead of seeing an increase in domestic AI job creation. This is due to the fact that workers who may have immigrated to the United States will now stay here, boosting competition in terms of both quantity and calibre. The fact that AI is now performing tasks like homework and assignments that are typically used to indicate proficiency, undermining the legitimacy of degrees and causing information asymmetry, further complicates this situation. Short-term wage pressure is likely to continue, and it might only subside if some of this talent moves abroad, perhaps to Canada, the United Kingdom, Australia, or Germany, where there may be a greater influx of Indian professionals.
Ultimately, retaining talent within India alone will not be sufficient. The country will continue to face the persistent challenges that have long been part of public discourse, and these issues may now become even more pressing. It is high time for policymakers to decide how best to leverage the current situation. The problems are well understood, and many of the potential solutions are already clear, including higher R&D spending, greater domestic AI job creation, easier business conditions, and broader improvements in India’s standard of living, among others. Therefore, what is now required is decisive action.
The article was published with The Statesman on September 26, 2025.
