BANGALORE - Several prestigious
high-tech projects have gone Hyderabad's way in
recent months, prompting speculation that
Bangalore's days as India's leading IT city might
be numbered. But while Hyderabad may be gaining
ground, it still has much catching up to do.
Bangalore, which enjoys the advantage of a solid
headstart, is still way ahead in the race.
In February, Hyderabad pipped Bangalore at
the post to grab chip-maker AMD and SemIndia's
prestigious Fab City project. The two
cities as well as another
southern Indian city, Chennai, were vying for the
US$3 billion project, which will host India's
first major silicon chip manufacturing facility.
The significance of the Fab (factory fabrication
model) City project can be gauged from the fact
that while total foreign direct investment flow
into India in 2004-05 was $3.75 billion and is
expected to rise to $7 billion this year, the Fab
City project alone is worth $3 billion.
The project is expected to act as the
catalyst that puts India on the global chip
manufacturing map. It has the potential of
creating tens, maybe hundreds of thousands of jobs
when fully operational. That Hyderabad was chosen
over IT frontrunner Bangalore for such a high
profile project came as a shock and was a huge
slap in the latter's face.
Even as
Bangalore was licking its wounds, it suffered
another setback. Hyderabad became the only city in
India besides New Delhi visited by President
George W. Bush during his three-day trip to India
in early March. Tens of thousands might have
protested Bush's foreign policies in Hyderabad,
but the IT industry saw the presidential presence
as a huge vote of confidence in the city.
Hyderabad became the only city in India other than
New Delhi to host two American presidents – Bill
Clinton stopped by in March 2000.
Hyderabad's IT industry is hoping that the
Bush visit will trigger another wave of
investment, as happened following the Clinton
visit six years ago, which apparently had the
long-term effect of improving Hyderabad's ratings
as a destination for IT investment. Adding icing
to the cake, Bush announced the opening of an
American consulate in Hyderabad, the fifth in
India. Bangalore was apparently considered, but
Hyderabad clinched the deal.
Hyderabad is
India's fifth largest city and ranks second in the
hierarchy of IT hubs in the country. Aggressive
promotion and massive development of digital
infrastructure along with the setting up of
numerous IT campuses in and around the city has
resulted in the transformation of Hyderabad to
Cyberabad. Oracle, Dell, Infosys, Microsoft,
Wipro, GE, iGate, IBM, Satyam, Tata Consultancy
Services, Amazon and Google have all established
centers in the city.
Energetic engagment
with the IT industry and an active role in
improving the city's infrastructure have all
worked to make Hyderabad attractive to investors.
This is in sharp contrast with Bangalore, where
sections in the Karnataka government are not just
indifferent to IT but actually hostile to it.
Bangalore’s infrastructure is crumbling and
political instability has denied the city's civic
administration direction. Hyderabad scores over
Bangalore with regard to government
responsiveness, investment friendliness and
infrastructure. The Andhra Pradesh government goes
all out to woo investors.
It is this
aggressive courting that helped Hyderabad clinch
the Fab City deal. India's IT and Communications
Minister Dayanidhi Maran said that while Chennai
showed "lukewarm" interest in the project,
Karnataka pressed hard and was a stiff competitor.
But Andhra Pradesh went a step further by
providing subsidies and infrastructure facilities
such as water and electricity. The state
government has also allotted 1,200 acres of land
near Shamshabad, where Hyderabad's international
airport is being built.
Hyderabad is
giving Bangalore competition on other fronts too.
Hyderabad's performance in IT exports is growing
at a faster rate than Bangalore's. In 2004-05 the
city's IT exports grew 64.5% over 2003-04,
Bangalore's growth rate in 2004-05 was a mere 10%.
In the current fiscal year Bangalore has
registered a 30% growth in exports till December
2005, while Hyderabad has registered 61% for the
same period - the highest in the country.
But Bangalore doesn't seem bothered yet.
Hyderabad's export growth rate might be
exceptional, but in real terms, Bangalore's
software exports are still over double those of
Hyderabad. "And Bangalore has managed to retain
the top position in the country's software
exports, despite the infrastructure hassles," says
B V Naidu, director of Software Technology Parks
of India (STPI), Bangalore.
Software
exports from Karnataka are poised to cross the
$8.5 billion mark in 2005-06, he says. Karnataka
accounts for 34% of the country's total software
exports, which stand at $23 billion so far this
year, he adds. Naidu says India's software exports
are expected to cross the $60 billion mark by
2010, and exports from Karnataka are expected to
cross the $20 billion mark by then.
Bangalore does not seem overly worried
about the challenge from Hyderabad. It believes
that the enormous head start it had in the IT race
is enough to keep it in front of the upstarts.
Even Hyderabad admits that Bangalore is way ahead.
Hyderabad is about where Bangalore was in the
early-to-mid 1990s, says A K Menon, the CEO of
Options, an executive recruitment company in
Hyderabad. "Hyderabad is projecting itself as
another Bangalore in the years to come," he says -
a point Bangalore needs to take note of.
As of now, Bangalore remains the favorite
destination for investment not just in IT but in
biotech as well. According to Karnataka government
officials, during the first four months of the
current fiscal year, 64 new firms opened offices
in Bangalore, including 43 with foreign equity,
which is roughly about four new companies
registering every week. Out of the total of 1,584
IT companies operating from Bangalore, 512 were
multinationals, 66 of them Global Fortune 500
companies. (By comparison Hyderabad has 127
foreign equity units although this is expected to
increase to 170 this year.)
Besides,
analysts believe that Bangalore's security
environment - the terrorist attack at the Indian
Institute of Science in December 2005,
notwithstanding - is far better than that in
Hyderabad. The threat posed by Islamist militants
and left-wing insurgents in Hyderabad is far
greater than in Bangalore. Hyderabad has witnessed
several terrorist attacks over the past decade,
including a suicide bombing last year. It is also
very susceptible to communal violence. But
Hyderabadis discount the danger. The Americans
would not have chosen Hyderabad for their
consulate if it was that unsafe, they point out.
The IT industry in Bangalore is more
concerned about meeting the shortfall in manpower
to support software and allied activities in
Karnataka. Of the 900,000 IT professionals in
India, a third work in Karnataka. "India will
require 2.5 million qualified professionals, and
Karnataka alone will require one million," Naidu
says, pointing out that by 2010 there will be a
shortfall of at least half a million. The
available manpower is not considered up to the
mark. "Only 50% of the professionals in India are
considered to be usable by the IT industry," he
says.
Bangalore might leave the job of
drawing in investment to the magic of "Brand
Bangalore". Hyderabad doesn't have the luxury -
yet - of resting on its laurels. It has to try
harder.
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