Examining the Economic Consequences of Immigration: The Indian Context

Authored by : Jenny Susan John

Edited by : Kausumi Saha

ABSTRACT 

For millennia, people have migrated in search of better economic opportunities and quality of life across the world. While international migration has tended to generate positive social and economic outcomes for both source and destination nations, it has also led to a surge in anti-immigrant sentiments and violent contestations between communities. The recent surge in anti-immigrant rhetoric and policies across many countries, including India, is a continuation of this dialectic process. However, available evidence seems to suggest that arguments against immigrants and immigration are both surprising and unsubstantiated,  particularly regarding its economic effect. This paper evaluates the economic impact of international immigration to develop a more nuanced understanding of the current situation of immigration/emigration,  particularly in India. 

INTRODUCTION 

Immigration is popularly understood as the international movement of people to a destination country of which they are not natives or where they do not possess citizenship, with an aim to settle or reside there.  Although violent conflict, political persecution, and trafficking are important causes for international mobility, over 9 out of 10 international migrants move for economic reasons (World Bank 2011).  Globalisation1 has led to a massive increase in both trade and immigration, but the economic, social, and political implications that accompany the movement of people vastly differ from the movement of goods or money. Consequently, the topic of international migration has prompted much political debate in the international community today. As the number of immigrants reached an all-time high in 20192, there has been a recent upsurge in anti-immigrant sentiment and policies in countries worldwide, from Latin  America to European Union to India. Contrary to the nature of anti-immigrant beliefs, however, multiple studies and available data show that international migration has generated enormous improvements in people’s lives. Immigrants have been recorded to enjoy higher wages, countries of destination tend to profit from an increased supply of labor, and countries of origin experience ease in labour market pressures. 

ECONOMIC IMPACT OF IMMIGRATION ON DESTINATION COUNTRY 

  • INCREASED COMPETITION

Policymakers and citizens in destination countries usually believe that immigration can become an economic burden, as it is feared to lead to loss of jobs, heavy burden on public services, social tension and increased criminality (UNDP 2009). The fear of increased unemployment comes from the classic supply and demand model in economics, wherein an increase in the supply of labour, while the demand for labour remains unchanged, leads to a fall in prices or in this case, decrease in wages (Figure 1).  However, no strong evidence exists to show that immigrants take native citizens’ jobs (Papademetriou et al. 2009; McMahon 2018). In fact, Ortega and Peri (2009) find that immigration increases employment in the destination countries one for one, implying that immigration increases the total GDP of the receiving country without affecting average wages or labour productivity. 

 

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