The controversy in India began when violence broke out between Chinese contractors working in India and Indian nationalists who believe they should get the jobs. Some of the media in India are referring to the incidents as "xenophobic altercations" where mobs of Indian locals attacked Chinese workers.
The best description I have read about what occurred is in OutlookIndia.
Many of the Chinese came into India with fraudulent business visas. They were able to get away with it because India has been very lax in enforcing the rules (sound familiar?). In order to fix the problem the Indian Ministry took the very draconian step of ordering every foreigner on business visas to go back to their home country to reapply for the visa. All foreigners, including Americans, Russians, and Chinese must follow this procedure.
Paradoxically the Indians aren't complaining that the Chinese illegal aliens make too much money — instead they complain that the Chinese workers are making too much! Indian locals claim that the Chinese work in luxurious work compounds and that domestic workers get Rs 87 a day compared to Chinese co-workers who get up to Rs 1,700 a day. That's quite a pay disparity!
According to the OutlookIndia article, Indian locals say that, "hordes of unskilled/semi-skilled imports from China are taking jobs from the unemployed Indian." One estimate put the total number of skilled and unskilled workers in India at around 25,000. To keep things in perspective, the United States allows about 125,000 foreign workers into the U.S. each month, and 1.5 million every year. Currently there are about 800,000 H-1Bs in the U.S.
So, India with a population four times bigger than that of the U.S. complains about a foreign worker population that is about .002% of its total population, compared to the U.S. who allows about 0.5% of it's population to enter its country every year. Put another way, the U.S. is more than 250 times more tolerant to foreign workers as a percentage of its population than India (I say "more than 250" since mobs of angry Americans haven't attacked H-1Bs yet).
Many people are coming to false conclusions about the fiasco in India because they are confusing business visas with employment visas. This is a description of the two visas according to the Indian Consulate in San Francisco:
BUSINESS VISA: Valid for 6 months/one year with multiple entries. A letter (on company letterhead) from Sponsoring Organization indicating the nature of applicant's business, probable duration of stay, places and organizations to be visited incorporating therein a guarantee to meet maintenance expenses, etc. should accompany the application. ii) Long term Business Visa for ten years (multiple entries) in case of US Citizens and five years (multiple entries) for other nationals are available only to those who have set up industrial/business joint ventures in India. This fact, along with the details of joint venture in India must be mentioned in the sponsorship letter.
EMPLOYMENT VISA: Employment Visa are initially issued for one year stay subject to fulfillment of certain conditions. This can be extended by Foreigners Regional Registration Office in India, if the job contract continues. Spouses and children will get coterminus Visa.India's visa system has similarities with the U.S. but making direct comparisons is tricky to do. The business visa closely resembles our B-1 visa. It's interesting to note that India's business visa is very short term for all workers unless they are there to set up outsourcing facilities. They give special preference to "US citizens", which makes sense since this nation seems to be so eager to move industries to India.
The employment visa is similar to our entire H visa program (H-1B, H-2B, etc.) but keep in mind that very few foreign workers are given that visa in comparison to the much more generous U.S. nonimmigrant system.
So, now that we understand the visas, let's get back to the Chinese problem in India.
The Chinese are causing big problems in India because so many of the workers came from China illegally — they are in complete violation of Indian visa guidelines. The Chinese should have applied for employment visas but they didn't because most of them would have been denied. The Chinese knew the employment visas wouldn't be granted so they gamed the system by using business visas. This is not unlike some of the B visa scandals that have occurred in the U.S. (like the car workers from Poland) with one major difference — Indians aren't going to put up with it any longer.
The OutlookIndia article raises an interesting question, and the answer may be considered very nationalistic by our standards. Personally I think Rajan makes a point that's just as true in the U.S. as it is in India.
This brings up the hotly contested question: are all Chinese workers here "engineers" and "technicians" with skills irreplaceable by Indians? Speaking at a meet in China, Indian ambassador S. Jaishankar said he couldn’t recall any projects requiring "such large manpower support from home" and urged the Chinese to think of an "India-specific approach".
But is international labour mobility something to be be shunned? Not at the cost of resentment at home, says Rajan. "At no point should the locals feel that outsiders are taking away their jobs," he says.