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Infrastructure drives investment

V. Jayanth

The pressure is on State Governments to provide the infrastructure to attract industrial investment.

— Photo: K.Gopinathan

An ambulance on an emergency run getting caught in traffic, as on this Bangalore road, is a regular feature in many cities, highlighting the need for better infrastructure.

THE CONCERN expressed by the Bangalore Chamber of Commerce and Industry over the infrastructure bottlenecks in the Garden City has sparked a debate in the southern region on the need for building infrastructure as a prerequisite for attracting investment. The point now is not whether there is a slowdown in investment in Karnataka or in the flow of information technology and IT-Enabled Services (ITES) companies to Bangalore and its neighbourhood. The debate is on the larger issue of States developing infrastructure to retain the competitive edge.

Seldom does industry openly criticise governments. This is what makes the Bangalore Chamber's remarks all the more significant. They have also prompted Union Communications and IT Minister Dayanidhi Maran to caution Chennai to learn the lessons from Bangalore. That drew a prompt and strong response from Tamil Nadu's IT Minister D. Jayakumar that the State Government was on top of the situation and investors were now making a beeline to the State because of its focus on infrastructure development.

Such exchanges may be natural for politicians but it cannot be denied that in today's competitive environment, investors demand the best deal and go for the safest and most attractive offer. Now that the power of States to offer tax breaks and incentives has been seriously eroded with the introduction of the uniform tax and the Value Added Tax (VAT) regime, infrastructure has emerged as a key determinant in investment decisions. Investors now look for readymade infrastructure, easy access to air and sea ports, and proximity to the source of raw materials.

What constitutes "infrastructure"? Industry sources explain that it may vary from sector to sector. But, basically, investors look for good roads, availability of water, power, and communication facilities, and easy access to air and sea ports. In the case of IT and ITES, industry looks for spacious and comfortable office space, a good road network, housing, and, above all, reliable telecommunication facilities with uninterrupted electricity supply. As the main offices are invariably located well out of the cities, it becomes imperative for these companies to provide good transport services for the staff to commute between the city centre and the workplace.

When an IT corridor develops with 30 to 50 companies setting up shop, hundreds of vehicles start plying on the same road from different parts of a city. Besides, the needs of thousands of personnel have to be met.

At a time when the IT and ITES sectors plan to generate employment for six lakh to eight lakh engineers over the next couple of years, the pressure on lead cities and towns and on their infrastructure is bound to rise significantly. When investors find a particular city unable to cope with the growth, they move to greener pastures. It all depends on the planning capacity of the city councils and State Governments. Already, given that Delhi, Bangalore, Chennai, and Hyderabad are getting congested, IT companies and BPOs are shifting their focus to "tier-two towns" such as Pune, Coimbatore, Mysore, Visakhapatnam, and Kochi to name just a few. These towns will have to meet the demands before it becomes too late and companies start scanning for other centres.

A question arises as to why State Governments should pay so much attention to IT and ITES. Karnataka's Deputy Chief Minister Prakash, in fact, raised the issue. Fortunately, Chief Minister Dharam Singh has thought it fit to discuss the problems with representatives of the Bangalore Chamber and the IT industry, following which the boycott threat has been withdrawn. The Tamil Nadu Government thinks positively too. Without losing focus on agriculture, health or education and the social sectors, the State Government does not want to lose its advantage in investment and industrial development. A clutch of projects are being implemented by the State Government and also by the Centre to develop an IT corridor, build new highways, flyovers, bypass roads, and also promote private housing off the IT corridor. With new investments and industries, there is a substantial generation of employment opportunities — both direct and indirect — economic growth, and a brand name too for the city or State. The spin-offs include new greenfield airports as in Bangalore or Hyderabad, or a new airport for Chennai, which has emerged as the major air hub of the south. Governments have to look at the big picture and become investor-friendly. The best advertisement would be the infrastructure a State can boast of. The ideal situation would be for States to set up industry advisory and consultative committees that can meet at least quarterly to resolve all outstanding issues.

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