The neglect finally hits where it hurts

Bangalored: IT trails neighbours in exports
While K’taka Logged 11% Growth In Software Exports, AP & TN Galloped At 41% & 37%, Respectively
The Economic Times


BATTERED by long years of neglect by government, a tired Karnataka and its capital Bangalore have fallen way behind rival neighbouring states in the pace of growth in software exports. During 2007-08, software exports from the state—the bulk of it from Bangalore—grew by just 11% even as Andhra Pradesh gallopped at 41% and Tamil Nadu at 37%, raising serious doubts whether Bangalore still deserves its title as the technology capital of India.
The national average growth rate during 2007-08 was 29%, far eclipsing the state’s. Karnataka exported software worth Rs 54,000 crore in the 12 months to March 2008 and Rs 48,600 crore in the year-ago period, when the growth rate was 36%.
“I fear for the future of the IT industry in Karnataka,” remarked Infosys Technologies HR director T V Mohandas Pai. “Karnataka has suffered on the IT front for the last four years for reasons very well known. The morale is very low and the results are there to see.”
Even after taking into account the 11% appreciation in the value of the rupee against the US dollar last year, the dismal growth does not justify the size of the industry in Karnataka, especially Bangalore, industry experts reckon.
Some others argue that since the base is so large, it may not be possible to sustain high rates of growth.
The Indian software services industry has been recording annual growth of between 28% and 35% in the last few years. According to Nasscom estimates, while IT services exports grew by 28% to $23 billion in 2007-08, revenues from business process outsourcing (BPO) were close to $11 billion, an increase of 30%. Total revenue from the IT and IT-enabled services sectors, including hardware, is estimated to have grown by a third to about $64 billion in 2007-08.
The main reason for Bangalore’s dismal show could be its woeful infrastructure. For about five years, the IT industry has been crying itself hoarse on the subject but to little avail even as competing cities such as Chennai, Pune and Hyderabad and the IT-savvy leaders lured investors away.
Karnataka’s former IT secretary Vivek Kulkarni, who served during what were perhaps Bangalore’s best years between 2000 and 2004, says “problems in the city are well known.” “Costs have gone up and productivity has gone down because people are constantly on the road,” he said, referring Bangalore’s now-fabled traffic jams.
Adding to the problems of the IT industry are challenges such as currency appreciation, wage inflation, attrition and recessionary trends in the US. Offshore advisory firm Tholons CEO Avinash Vashishtha says many large MNCs, who first set up shop in Bangalore, are now looking at other cities to reduce operating costs. At the same time, many Indian companies based here are considering expansions abroad.
While telecom connectivity is in place, the road to office has become longer and more arduous. Karnataka’s new BJP government says its agenda includes revitalising Bangalore and the IT sector. It says it will pay serious attention to problems like traffic management, invite investments in areas such as semiconductors and hardware to broaden the IT basket.