India's IT industry hit with a case of
the jitters By Sudha Ramachandran
BANGALORE - With two of its most ardent
cheerleaders - the chief ministers of the southern
states of Karnataka and Andhra Pradesh - being logged
out of power in recent elections to state assemblies,
the mood of India's information-technology industry is
far from upbeat. But while top IT brass are insisting in
public that the industry will do well whichever party or
personality is in power, in private they are admitting
that the industry might not get the many concessions it
did over the past decade.
Bangalore and Hyderabad, the
capitals of Karnataka and Andhra Pradesh respectively,
are India's leading software hubs. The two cities
are fierce competitors for investment in the IT industry.
Their remarkable success stories in the IT field
have been attributed in significant measure to the boost
they received over the past five years from the Congress
government under chief minister S M Krishna in Karnataka
and the Telugu Desam Party (TDP) government under
chief minister Chandrababu Naidu in Andhra Pradesh. The
big question is how well the IT industry will do with
both patrons now out of power.
At the helm in Andhra Pradesh for
nine years, Naidu, one of India's most computer-savvy politicians,
transformed Hyderabad into a prosperous IT
hub. With his focus on IT and power-sector reforms, he
put Hyderabad on the international map. Naidu, often
called the "CEO of Cyberabad", was lionized by the
World Bank and his pro-IT policies invited praise from former
US president Bill Clinton, Microsoft chairman Bill
Gates and corporate India. However, he failed to
impress rural Andhra Pradesh. The benefits of his IT revolution
failed to reach the poor and, on election day,
Andhra Pradesh's rural poor spoke up: they voted Naidu out
of power.
A similar story unfolded in neighboring
Karnataka, where the rural voter rejected the
Krishna government. While the Congress in Karnataka did
not suffer the humiliating defeat that the TDP did in
Andhra Pradesh, it secured only 65 seats in the 224-member
house. Three parties - the Bharatiya Janata Party (BJP),
the Congress and the Janata Dal-Secular (JD-S) - have
emerged with a roughly equal number of seats. A state
government is yet to be formed almost two weeks after
the announcement of results, thanks to bitter fighting
over who will head a coalition government.
Reacting to Naidu's exit, the software-industry lobbyist
National Association of Software and Service Companies
(NASSCOM) said it did not foresee any adverse impact
in the wake of the defeat of the TDP in Andhra Pradesh.
NASSCOM president Kiran Karnik said that in his
"experience of working with different states,
irrespective of the political party/parties in power, we
have always received strong support and seen great
enthusiasm to promote IT. We are certain that the new
government in Andhra Pradesh will continue its strong
promotion of the IT industry."
Brave
words notwithstanding,
there is concern in the industry. The exit
of its most ardent cheerleaders has made the industry
jittery. This is especially so in Andhra Pradesh, where
the industry revolved around the personality of Naidu.
Unlike Bangalore, which built on its long-standing
reputation as a technology city thanks to its
many scientific-research institutions and engineering
colleges, Hyderabad had to start from scratch.
Laptop in hand and projecting himself as the chief
executive officer of Andhra Pradesh rather than as its
chief minister, Naidu provided the IT industry with
incentives, such as providing land at concession rates
to set up shop in Hyderabad. He was hugely successful.
In fact, at one point he succeeded in pushing Bangalore
out of the top slot in the IT industry.
Krishna's role in the IT miracle in Bangalore
was less significant. Unlike Naidu, who almost founded
the industry in his state, Krishna's role was crucial in
that it rescued the industry from the lethargy that had
set in under his predecessor, J H Patel. It was
Krishna's dynamism that stopped the flow of IT majors to
Hyderabad in preference to Bangalore.
The IT
industry in Bangalore has been less dependent on
Krishna. In fact, powerful sections within the industry
have in the past complained that Krishna did not do
enough to support the industry. Wipro chairman Azim
Premjee, for instance, bitterly criticized the Krishna
government in public for failing to improve
infrastructure in Bangalore.
But while the IT
industry in Karnataka is less concerned about Krishna's
exit, it is worried that an unstable government and
political uncertainty are not good for the industry.
What is more, the emergence of the JD-S as a kingmaker,
even a likely king, has made the IT industry in
Karnataka nervous. The JD-S is a pro-farmer party with
its support base in rural Karnataka. Its leader H D Deve
Gowda, a former state prime minister, is virulently
anti-Krishna and equally critical of his policies. The
JD-S will call the shots in the new government whether
it is headed or supported by the Congress or the BJP,
and that is not good news for the IT industry.
There is concern in Bangalore and Hyderabad that
the election result will make the new governments in the
two states more reluctant to back the IT sector. After
all, Naidu's fate would restrain his successor, Y S R
Reddy, from going all out to promote the IT industry.
And Krishna's successor would surely prefer to be seen
as a man of the masses rather than as the poster boy of
the software sector in Bangalore. Electoral exigencies
would demand that he back rural Karnataka.
However, techies in Bangalore believe that the
software industry is far too important for the state
government to ignore.
Kiran Mazumdar-Shaw,
chairman of Biocon Ltd, India's largest biotechnology
company, insists that the technology industry will
continue to do well. "It is a sector that cannot be
ignored, and it is giving a global credibility to the
country. All governments will certainly support this
sector very, very robustly," she says.
Senior
executives in Infosys Technologies Ltd argue that the
mandate in both states must be interpreted not so much
as opposition to IT-friendly policies as it is a cry for
similar attention to problems in rural areas such as
drought, debt, scarcity of drinking water and so on.
Therefore, they insist, the new governments will pay
more attention to rural needs, while not doing anything
to hurt the IT sector.
The IT industry also
seems to believe that the industry has grown powerful
enough to run on its own steam. "The IT industry has
reached a fairly self-reliant stage now and will
continue its growth," points out Nandan Nilekani, CEO of
Infosys.
What we are likely to see in the coming years
is governments in Karnataka and Andhra Pradesh moving away
from the virtual reality of their computer cocoons and
investing more in the real world of the rural poor.
Political survival dictates this course. This would mean
that concessions to the IT sector would be reduced.
However, they will continue to parade the achievements
in the IT sector. The IT industry will need to dip into
its own resources and depend on its own energies to move
forward.
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