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AMID A ROAR OF applause, Rajat Gupta rises from his seat and climbs to the stage to receive his lifetime-achievement award from India's prime minister. Thirty-two years after leaving India to study at Harvard Business School, Gupta is at the top of his profession as managing director of management-consultancy McKinsey & Company. And he's given back to his homeland, recently raising $50 million in seed funding for a business school in India's emerging hi-tech hub of Hyderabad.

Gupta is just one of the 20 million Indians living and working overseas. The Indian diaspora is second in size only to China's, its combined income is $160 billion--equal to 35% of the motherland's gross domestic product--and the Indian government wants a piece of it.

With that in mind, the government last week rolled out the red carpet for its diaspora, hosting a lavish three-day conference in New Delhi in honour of the likes of Gupta and other overseas Indians. Nearly 2,000 people of Indian origin, or PIOs, made the trip to Delhi from 63 countries. There were Nobel laureates, writers and business moguls, among others. It was the largest gathering of overseas Indians in the country's 55-year history. And it was all part of an effort by the Indian government to win the help of overseas Indians in building India's economic future.

"It's not only their personal income and ability to send remittances that India is interested in, but also their influence in bringing corporate investments to India from all over the world," says Gupta.

Prime Minister Atal Behari Vajpayee used the event to announce a raft of new proposals aimed at attracting more investment from its overseas workers. The event was a smart move. It stirred a sense of national and cultural identity among its well-heeled participants, and showed that India understands that in the age of globalization some of its best resources might lie beyond its borders.

What India also needs to understand is that by inviting investment from its top-flight expatriates it is also inviting demands for economic reform and modernization. That's a good thing. India lags China in infrastructure. Its highways are dusty and full of potholes; its rail system is overcrowded; its airports are an organizational shambles; and its telecommunications system is unreliable. What's more, starting a foreign enterprise in India is an exercise in red tape, and stringent labour laws continue to tie the hands of employers.

"All this has got to change, and it's got to change quickly, " says Karan Bilimoria, a first-generation immigrant to Britain and chief executive of British company Cobra Beer. "India has got to be outward looking. It's got to embrace globalization, however painful it may be." Bilimoria, whose company produces beer in 30 countries, says he wants to set up shop in India, but the red tape is too daunting.

REMEMBER HOME

The stakes are high: India receives $14 billion a year in official remittances--mostly from semi- and low-skilled workers in the Gulf who wire money back to their families. That money has become the largest contributor to the country's $70 billion foreign reserves.

But in the category of foreign direct investment the contribution from overseas Indians is only 9.15% of India's $4 billion. China's expatriates, by comparison, are responsible for about half of their country's $48 billion in FDI. India wants to see the success in the flow of remittances extend to investments in Indian businesses and infrastructure projects.

Having seen the enormous economic role expatriates have played in countries like China and the Philippines, India wants more strategic and lasting contributions from its diaspora.

"Their expertise, their ideas, their access to venture capital and bank financing and their sound advice on the viability of business ideas--that is how they can help," says J.C. Sharma, an official in India's External Affairs Ministry who handles PIO policy issues and who was chiefly responsible for organizing the Delhi conference. He adds that PIOs have always been interested in reconnecting with their cultural roots.

The government is playing the roots card with a proposed policy change that would allow dual nationality for Indians in several countries, including the United States, Canada, Britain, New Zealand, Australia and Singapore. Currently, overseas Indians must give up their Indian nationality upon obtaining a foreign passport.

The offer of dual citizenship is largely a symbolic gesture designed, as the prime minister said in his announcement, "to deepen the connection between India and its scattered seed." It will also allow overseas Indians to buy and sell property in India and remove immigration hassles by making entry visas unnecessary. Dual nationals will not, however, be given voting rights.

India's message to some of its wealthiest and most successful expatriates--especially those who were raised in India and taught in Indian schools--is loud and clear: Come home, we need you. They would bring a much-needed layer of management expertise and experience to Indian industries.

They would also prove a strong lobby for economic reform. As Sam Pitroda, chairman of the U.S-based telecommunications company WorldTel says: "Nonresident Indians can fuel the movement to modernize India."

Even if they don't come back, the Indian government sees PIOs as a key to new markets for Indian goods and new investment in India and Indian companies. People like Anupam Govil, director of the U.S.-based venture-capital firm 2iCapital, fit the bill. After studying engineering in India, Govil left in 1989 for the U.S., where he worked his way up the corporate ladder in the software industry and then in management consulting. These days Govil is launching a $150 million venture fund at 2iCapital focused on the Indian market. "Our goal is to invest in companies in India that have a global potential," he says. "Any opportunity I look at has to leverage India in some sense."

The Indian government wants more examples like Govil. But it faces two major challenges. First, India has rocky relations with the less affluent of its diaspora. They feel India has abandoned their interests over the years. In Gulf countries, for instance, the government has offered little support to short-term migrant workers facing poor working conditions and labour disputes. Despite their large contributions to India through remittances, these workers were noticeably absent from the glitzy gathering in Delhi last week.

That said, the government did use the event to announce several new programmes aimed at helping PIOs in the Gulf, including a welfare fund for overseas workers and reserved places for the children of Gulf expatriates in higher education.

Secondly, the chance to reconnect with their Indian roots is not sufficient incentive for most high-flying Indian businessmen and venture capitalists to delve into the Indian market. The determining factor in any investment decision will remain the potential return it can bring. Look at China, says Aman Mehta, chief executive of HSBC's Hong Kong operations. "Chinese business people in Taiwan, Hong Kong, and elsewhere, have been channelling money to the mainland purely because of the opportunities their country offers them. We should keep that in mind when we discuss how the Indian diaspora can contribute."

The area which offers the most opportunities for closer collaboration is the tech sector. Technology-industry leaders in India want PIOs to help the country move beyond back-office administrative services and call centres and into providing more value-added tech services. "We don't just want to be a back-end service provider," says R.R. Shah, secretary to India's minister of information technology. "We need to position ourselves as a knowledge partner in the future."

The next wave for the Indian technology industry is likely to lie in large-scale data analysis and data mining. Databases packed with information--genetic data gathered by biotech researchers, for example--need to be culled, sifted through and analyzed. That requires advanced software and is right in India's sweet spot.

"You can collect as much data as you want, but how do you relate data from different databases and find trends," asks Alok Chaturvedi, director of Purdue University's e-Business Research Centre in the U.S. "Data mining becomes a critical aspect. That's a key area where India and the U.S. can collaborate."

The methods for that data analysis, some of which require supercomputing power, are already available in India. For example, the Centre for Development of Advanced Computing, in Pune, about 100 kilometres southeast of Mumbai, is developing supercomputers for use in science and engineering. "India could leverage its information-technology expertise in this area, and even create some intellectual property in this industry in the next couple of years," says Rajiv Desai, founder of the U.S.-based software consultancy 3Di Systems and the architect of America's Mars Pathfinder mission in 1995.

Whether in knowledge-based industries or other sectors where India is eager to cooperate with PIOs--defence, biotechnology research and pharmaceuticals, to name a few--India says it's not just looking for money. Funding for good ideas is important, but to move up the value chain India will need intellectual capital, management know-how--and a commitment to modernization.

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WHAT INDIA WANTS

Overseas Indians can help:

• Attract foreign direct investment

• Get Indian products into new markets

• Create opportunities overseas for Indian companies

• Equip Indian companies with management expertise

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OVERSEAS HEROES: THE FACE OF INDIA'S DIASPORA

Indra Nooyi

President and CFO, PepsiCo

Deepak Chopra

Founder, Chopra Centre for Well-Being

Mira Nair

Film maker, made Monsoon Wedding

Aman Mehta

CEO, HSBC, Hong Kong

Vinod Khosla

Co-founder, Sun Microsystems

Sabir Bhatia

Creator of Hotmail

Kanwal Rekhi

Venture capitalist, IndUS Entrepreneurs