IMA

INDIA EXECUTIVE BRIEFINGS

POLITICS & ECONOMY

Adit Jain, IMA India

2 April, 2005
Bangalore: Another sign of times to come

I have been amongst the most ardent promoters of ‘Bangalore – the garden city’ to the
multitude of investors I meet on Economist Group briefings across the world. Alas, this can
no longer be so. I say this with some conviction – as I see the latent fear of creaking
infrastructure and sheer incapacity to cope – come to life. The signs are there for everyone
to see – some intangible, others more obvious.

Consider this. While some talk about ‘how Bangalore does not feel the same anymore’, on a
recent visit I discovered that a large outsourcing project that had fallen into the lap of a
Bangalore based company was, subsequently, moved to Vietnam. And sadly, for all the
wrong reasons. The company required some 2000 room nights of hotel space during a
twelve month period for its executives who, would travel in from the United States. These
rooms were not easily available; when they were, it was at unreasonably expensive rates.
The reason of alarm lies in the fact that this is not an isolated incident. Bangalore city, Indian
companies and therefore India have begun to tragically lose their ‘flavour-of-the-month’
standing and the word is spreading faster than many of us are prepared to admit.

Till recently, Bangalore offered all the advantages that transnational corporations sought. It
had the rare combination of talent with a strong work ethic; and its infrastructure and local
governments were comparatively better off. It had fine weather too! People in far off places
who had barely heard of India, could indeed, have heard of Bangalore. When US jobs were
lost and employees laid-off, the expression was that they had been ‘Bangalored’! This
wonder that had put India on to the global business map, like many of India’s other
advantages, has begun to fritter away. And yet again, central and local governments must
be held responsible – more than anyone or anything else.

The primary issue for state intervention is that of infrastructure. First, it is grossly inadequate
and even what exists is deteriorating way too rapidly. Traffic jams are common on the airport
road even past 11 pm. Flyovers to alleviate this problem just don’t get completed – which
means that while the main problem remains unsolved, it prolongs and aggravates the
inconvenience to residents and visitors. The ‘international’ airport is an old Hindustan
Aeronautics air-strip – and the prospects of a new world-class one remain dim due to politics
and vested interests.

Just to illustrate the above - I now spend three days in Bangalore to meet as many clients as
I used to in a single day, not so long ago! My greater time is lost sitting in traffic snarl-ups,
exasperatingly shifting appointments that I can no longer keep. I can never find a hotel,
easily, that I can afford. Even the Clubs are largely sold out. As the CEO of one of the
largest European IT companies told me…. “People come to Bangalore, get stuck in traffic,
cannot find a hotel room and then move on quickly to Vietnam or the Philippines”.

So what do Bangalore based companies do. Well some of them carry on regardless, praying
that things will get better. Others relocate their expansion plans to Chennai or Gurgaon. Still
others erect their own infrastructure… roads and even hotels. All this costs money, time,

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effort and attention…. scarce commodities, one would have thought, which should in the
normal course be used for running businesses. Sadly, they have to be channelised to make
up for what the government will just not do or, perhaps, is simply unable to.

The story of Bangalore vindicates the popular hypothesis that the real failure of India has
been in its sub-optimal governance. Only lip service is paid to the things that count – officials
dispense swanky power-point presentations at conferences but little else on the ground.
They, on their part, could cite the real challenges they face and ask what they should do.
Well - most tangibly - infrastructure is the responsibility of the State. Large, long-gestation
investments required for this sector cannot always present a valid business proposition – but
are essential nonetheless, for others to run businesses, create jobs and thus provide the
foundations for economic growth. And if private investment is not forthcoming - there is no
choice left, but for the State to step in. If this does not begin to happen quickly, many more
Indian cities will lose out to Vietnam, and more importantly, end in chaos. One could forgive
the state if it faltered in helping businesses but served its citizens – but our Government’s
inability to set priorities and address them with conviction, disallows it from supporting either
business or citizens. A performance (or the lack of it) – which is hard to accept, and even
harder to forgive.

Cities such as Bangalore are crucial for India. They are symbolic of India’s potential to
emerge as an important economic destination. They need all the responsible assistance,
from the Central and local governments, that they can get and much more. Given the
sometimes limited voice of citizens, businessmen must demand this of their government in
the strongest possible terms. Anything less and we will forge ahead towards disaster.