IT sector: Parasite or driver of economic growth?

IT sector: Parasite or driver of economic growth?
The Statesman

During the rift between the Karnataka government and the IT sector over Bangalore’s infrastructure, important lacunae came to light. The truce that’s since been called, however, should not become an excuse to brush problems under the carpet

The truce called between the information technology sector and the Karnataka government this week could not have come too soon, considering the damage their near confrontation over Bangalore’s infrastructure was doing to the country’s image. The end result, too, has been encouraging with the two getting down to explore possibilities of a partnership for the betterment of Bangalore.

IT companies have been seeking basic infrastructure, including wider roads, proper drainage and sewage systems, besides a network free of daily traffic snarls. This plea is not of recent origin as successive governments in the state would agree. So it was the unwillingness of the coalition government to act that brought matters to a head.

Which is why, after watching the state government’s apathy and casual approach to these demands, about 150 leading IT firms had earlier decided to stay away from the prestigious annual information technology show. The sector was chided for this and its decision was seen as “blackmail”. Organised by the state IT department every November, the BangaloreIT.in, as it is called nowadays, attracts a large number of Indian and foreign companies. Karnataka takes pride in showcasing the achievements of the city as the intellectual capital of India.

Last year’s show, for example, saw about 285 companies participating, including 120 foreign entities. About 150,000 people participated in the event, including some 40,000 businessmen. Which is why no company would want to miss such an event, despite its threat to the contrary, albeit for a good cause. The IT firms’ stand on infrastructure, however, ruffled the government.

Instead of considering the seriousness of the problem which was being highlighted, it accused this sector of being a parasite. In a clear attempt to side step the main issue, it charged the software companies with ignoring the interest of local job seekers. With prospects of a midterm poll in the state looming large, the ministers in the coalition government sought to “put the IT sector in its place”.

The fact that the IT companies do not contribute to any party fund was also not lost on these worthies. So the time seemed ripe for specious arguments.
Then virtually everyday, Bangalore has been witnessing a “rasta roko” by residents of one or the other colony in sheer frustration at the civic authorities’ failure to improve the city’s infrastructure. Further evidence of the pathetic state of affairs came from the recent Karnataka High Court decision to appoint a three-member panel to monitor the condition of city roads.

Yet, for voicing the same concerns, the IT sector found itself being singled out; even held responsible for all the ills afflicting the garden city — from causing road congestion to driving house rents skyhigh. It was also accused of being “irresponsible, selfish” and of creating a new varna or caste of software engineers with mind boggling salaries.
Many people naively assumed that if the city got better infrastructure the beneficiaries would be the IT companies and their staff and not the common citizens. There cannot be a more jaundiced view. To the politicians and their supporters, it was convenient to forget the contribution this sector had been making to the state’s growth in addition to the national exchequer. What mattered more was the “audacity these elite firms” had shown in reminding the coalition government of its duties.

The information technology sector accounts for 25 per cent of Karnataka’s GDP. It gave Rs 27,000 crore to the exchequer by way of software exports last year. The city-based IT and IT- enabled units accounted for 99 per cent of this contribution. Last year alone, these firms provided employment to about 250,000 people and this number is set to grow by another 100,000 this year.

Major beneficiaries of this development: Bangalore, Mysore, Mangalore and other places where IT companies are spreading their wings. The state saw a 26 per cent growth in revenue from VAT, largely due to the IT sector. Across India, some 500,000 people are employed by this sector which contributed $23 billion to the foreign exchange reserves of the country. Equally important, the sector spends Rs 10,000 crore by way of salaries on its staff of which almost 30 per cent is spent in Bangalore itself by software engineers. All these figures are from government and related sources as also the National Association of Software and Service Companies.

In other words, proponents of the sector argue that economic gains and the consequent improvement in the standard of living of a large number of people in varied fields can remain invisible only to the most ill-informed.

Even otherwise, spin-off benefits from the sector’s growth and the consequent development of Bangalore are evident from the splurge in direct and indirect employment in a host of industries — from tourism, hotel, restaurants, malls and telecom to courier services.

So when the government charged that this sector had not contributed to the development of the state, such industry leaders as Mohandas Pai of Infosys, Bob Hoekstra of Phillips Software, Som Mittal of Hewlett Packard and Flexitronics’ RK Mishra had reason to fume. Regarding allegations that the sector had ignored local talent by not providing jobs to Kannadigas, the industry’s plea has been that “we are an equal opportunity employer following non-discriminatory employment policies”.

The government’s argument does not cut much ice. This is evident from the growing number of middle-class families which have moved into their own flats in multi-apartment complexes across Bangalore — all on the strength of the jobs their wards have in software companies. Yes, they are very much Kannadigas.

Another salient feature of the IT sector’s contribution is that for the first time children of many middle-class families, irrespective of their caste affiliations, have found jobs through sheer merit and not merely on the basis of reservation and quotas. This is one thing that politicians with their vote-bank politics cannot digest.

The government’s reaction to the industry’s pleas for better infrastructure, therefore, has not done its image much good, however well meaning it may have been in seeking jobs for the local people.

Obviously, the government was stung by the industry’s demand and the repeated embarrassment for its non-governance. To be fair, the government did initiate long-term projects such as the new international airport and the proposed Metro railway. The problem, however, is that these would take five-six years to materialise.

What the IT sector and the common man has been seeking is immediate action to prevent flooding of roads, cleaning of drains and sewage pipes, besides the asphalting and widening of pothole-filled roads.

The IT sector, on its part, would do well to see how best the benefits of its technology can reach the rural masses. For that it would need to give up its herd mentality of seeking locations in and around Bangalore alone.

Possibilities of dispersing to areas outside the city, with proper governmental planning and development, would prove to be beneficial.
Similarly, this industry’s involvement with the government in improving roads and infrastructure in the city, a step initiated after the recent truce, should take pride of place. But it is important to remember that public-private participation in infrastructure projects alone would not provide the required cure for the city’s ills. A proper monitoring of such projects would be imperative.

This is crucial as the private sector’s experience in building one of the arterial roads to the Electronics City housing the IT companies, namely, the Bannerghatta Main Road, has not been encouraging.

Even after corporates such as Honeywell, Accenture, HSBC Bank and Mantri Developers contributed at least Rs 2 crore for tarring this all important road and making it a four-laned one two years ago, the situation remains bad. Worse, nobody seems to be answerable.

The government and the IT sector would find it helpful if their newfound friendship and promises of cooperation could be translated into one of trust and transparency. At least, till the next BangaloreIT.in!

Otherwise, the city’s poor image on the infrastructure front would come as a slap in the face of Bangalore and the country, as liquor king Vijay Mallya put it.