Political Meddling Could Strangle India's Golden Goose

Political Meddling Could Strangle India's Golden Goose
Bloomberg News / International Herald Tribune

India's software exporters are slowly sinking into the quagmire of disruptive politics, in the process losing one of their principal advantages over traditional businesses like manufacturing and banking services.

A former Indian prime minister this week questioned the rationale of allotting government land in and around the city of Bangalore to companies including Infosys Technologies, the country's No. 2 software service provider.

"The favors to information technology and biotechnology industries will not only attract public criticism but discredit" the government, H.D. Deve Gowda, prime minister between June 1996 and April 1997, told the Economic Times newspaper.

Another challenge to India's $22 billion technology services industry surfaced last week when Prakash Karat, general secretary of India's main Marxist party, wrote an article arguing that workers had a universal right to strike.

Karat's commentary, published in his party's newsletter, is not specifically about the software industry. It says only that "the working people will rebuff all attempts to put restrictions on the right to protest and the right to strike."

The commentary has nevertheless provided left-wing politicians enough ideological ammunition to go after governments in states like West Bengal that have banned strikes by software code-writers and network managers by saying that these workers provide an "essential service."

Following Karat's article, the Communist Party of India leader D. Raja rhetorically asked, "Aren't those employed in the information technology industry workers?"

Political interference in the software industry, the mascot of India's economic resurgence, is both inevitable and risky. It's inevitable because India's software industry is no longer a small dot on the politician's radar screen. Software and services exports account for more than a fifth of India's shipments of all commodities and products.

Including call centers, medical transcription centers and other back-offices, the Indian information technology industry employs more than one million people. The world media keenly watches its successes and tribulations.

Political meddling is dangerous because foreigners, who have invested an estimated $35 billion in Indian equities since 2000, may start taking a dim view of the country if its highly profitable knowledge industry is threatened.

At every major Indian software company, a bunch of people sit in a high-security room staring intently at their computer screens, apparently doing very little. These highly trained engineers are monitoring computer networks of multinational corporations, ensuring they work smoothly at all times.

To win this business, Indian companies have had to convince Western clients that their networks will not go unmonitored even if war broke out with Pakistan. The work brings India millions of dollars every year. What happens if these engineers go on strike and the computer systems of a global bank collapse?

Superficially, it may appear that the industry's recent brush with politics is a minor blip, a result of a few political luminaries trying to settle scores using software as a ruse.

Deve Gowda, for example, may be questioning land allotments to retaliate against the chairman of Infosys, N.R. Narayana Murthy, whose criticism of Bangalore's messy urban infrastructure has upset Gowda. His party is part of the coalition that rules the state of Karnataka, of which Bangalore is the capital.

Similarly, Karat's insistence on the right to strike may be aimed less at the software industry and more against his Marxist colleague Buddhadev Bhattacharya, the chief minister of the eastern state of West Bengal.

The more dogmatic Marxists have been offended by Bhattacharya's investor-friendly policies, not to mention his penchant for quoting Deng Xiaoping, who ended China's isolationism.

Skeptics might argue that the threat of political interference is unreal. After all, why should highly compensated engineers who get pay increases of 10 percent to 15 percent a year want to join left-wing political unions?

The answer is simple. Since the communists dominate India's organized labor movement, workers seeking to get organized for collective bargaining have little choice. For the same reason, bank and insurance employees, too, are members of communist-affiliated unions.

Centre of Indian Trade Unions, linked to Karat's party, is serious about getting into software companies. It has already formed a small union in Calcutta, the capital of West Bengal. These "laborers of the information age," as M.K. Pandhe, the union's president, referred to software professionals recently on the Rediff.com Web site, "toil long hours, they work at night, and some of them still get meager salaries."

Meager salaries? Call-center remuneration is higher than what the Indian Institutes of Technology pay their young professors. Since boredom and stress are unavoidable, some employers provide in-house dance lessons.

As for Deve Gowda's complaint about giving land to software companies, he should ask himself: "Who or what has made Bangalore real estate valuable?" After all, the city has few good roads, lacks a decent airport and is plagued by acute water shortages. Where would Bangalore have been today without software?

Politics, however, doesn't always operate in the realm of reason. So the software industry, the Indian economy's golden goose, must resist political intimidation with all its lobbying power. That is the only way the knives will slide back into their sheaths.