Concerned over the under-valuation of rupee that was making the Indian exports cheaper, the United States Electronic Industries Alliance on Wednesday proposed tightening the L-1 visa rules to prevent foreign companies operating in India to bring their employees to the US.

The Indian rupee, Chinese yuan, Japanese yen and Taiwan and Singapore dollars are "the most undervalued Asian currencies," the industry body said in a report authored by its president Dave McCurdy and chairman of board of governors Ronald L Turner.

One reason for the US to take a moderate approach to this issue is China and other Asian nations, including India, hold their reserves largely in US Government securities, it said.

"If the Asians stopped buying or began unloading these, the dollar would fall even faster and bond yields would rise, the report noted.

"By buying government securities, the Asian central banks are lending the US cheap money, holding down US interest rates and sustaining consumer spending -- on Asian products, in some cases -- and mortgage borrowing," it said.

The main concern is not outsourcing but demagoguery and political overreaction to this business practice, which is not new and will lead to protectionist policies, it said.

Gaining access to highly specialised talent is an important component of US competitiveness. Nearly half of the people hired on H1-B visas have graduate degrees, and only 5 per cent of the US population has the same level of education. A large percentage of H1-B visa holders are graduates of US schools, the report said.

It suggests foreign masters and PhD graduates should be exempted from H1-B cap and a fast-track green card given. On the other hand restrictions on L-1 visas should be tightened.

The report wants the US educational system to be upgraded in order to compete with the Chinese and the Indians.

"The lack of an over-arching vision with inadequate investment in innovation, contributes to short-term and false choice that could potentially lead to critics' prophesis of inevitable Chinese or Indian economic dominance.

"The core value of a knowledge-based company or society should be innovation, which at its heart is creativity plus risk-taking," the report said, urging the US to spend more on research and development.