ABSTRACT
The first stage of globalization was characterized by shifting of blue-collar manufacturing jobs from the West to low-cost production centres in developing countries, particularly in East and Southeast Asia, while the cities of the developed world increasingly turned into hubs of white-collar service-sector activities. However, since the late 1980s, further advancement in IT has made possible the outsourcing of lower-order IT-enabled service (ITES) functions to cheaper destinations, like Ireland, the Philippines and India (Dossani and Kenny 2003; Srinivasan and Krueger 2005). Now an integral part of the business models of multinational firms, by 2010, outsourcing of office jobs generated US$106 billion in global revenue, with India accounting for a 55% market share (NAASCOM 2011). The major factors attributed to India’s attractiveness for outsourcing
white-collar office jobs are: availability of a large human resource pool which provides a 60% to 70% cost advantage over developed countries, by adding over 570,000 technical graduates and another 3.3 million young graduates (and postgraduates) annually to the labour pool; and enabling a public policy environment and established business processes (NAASCOM 2011). Having begun at the lowest end of the IT services outsourcing value chain in the mid1980s by doing routine software coding work and supplying engineers to Western multinational corporations (MNCs) on short-term contracts, India has now emerged as a highly diversified market for sourcing a wide spectrum of offshore services. The IT-ITES sector has become a crucial stimulant behind India’s national
economic growth. Between 1998/99 and 2010/11, its contribution to gross domestic product (GDP) increased from 1.2% to 6.2%, while its contribution to exports increased from less than 4% to about 26% (NAASCOM 2011). The United States is the largest customer of India’s IT services, and accounts for over 60% of the sector’s export revenue. From its very inception, the IT export market has remained overwhelmingly oriented towards the Englishspeaking countries and this has led to clustering of global and local IT firms
around the biggest cities of India, which have a large English-speaking labour pool. Studies based on the location pattern of IT firms, export volume and employment figures classified seven metropolitan regions (each having a population above 5 million) as major IT-ITES clusters: Bangalore, Hyderabad, National Capital Region of Delhi (Delhi NCR), Mumbai (Bombay), Chennai (Madras), Pune and Kolkata (Calcutta) (see Table 14.1). Together, these seven cities account for 92% of the export trade volume (NAASCOM and Kearney 2009). The gradual liberalization of the Indian economy since the mid-1980s
has facilitated the growth of the IT-ITES sector through private enterprise (Parthasarathy 2004). Two national policy initiatives – the Software Technology Parks of India (STPI) scheme of 1991 and the Special Economic Zone (SEZ) Act of 2005 – have played a significant role in the development of the IT sector. Since most of the SEZs of the world are oriented towards industrial manufacturing or transportation logistics, the IT-ITES-oriented SEZs of India are a particularly unique concept. Apart from these national schemes, sub-national state governments (referred
to as state governments for the remainder of the chapter) are also facilitating development of the IT cluster in the metropolitan cities of their region. There has been increasing competition for investment since the beginning of the economic reforms. Major state governments have framed their own IT policies outlining incentive packages and have developed institutional structures to fast-track investment. However, there are substantial variations in the political-economic cultures
across the states, which significantly influence regional economic development patterns, even though they are operating within the same national-level macro-economic environment. Thus, state-specific factors such as degree of collaboration amongst the political elite, business friendliness of the political parties, and perceptions about the region amongst investors, shape the formation of the growth drivers for the specific IT clusters. Through analysis of the IT policies and local planning cultures of the six
leading states (Andhra Pradesh, Karnataka, Tamil Nadu, Haryana, West Bengal and Maharashtra), this chapter provides a broad perspective about the trends and patterns driving the formation of the IT cluster around the seven key metropolitan regions: Hyderabad (Andhra Pradesh), Bangalore (Karnataka), Chennai (Tamil Nadu), Kolkata (West Bengal), National Capital Region (Haryana), Mumbai and Pune (Maharashtra). The IT clusters in the National Capital Region (NCR) are located across the administrative domain of three states – Delhi, Gurgaon (Haryana) and NOIDA (Uttar Pradesh). However, Gurgaon has by far the most advanced IT cluster in the region and has, therefore, been considered for discussion here. This chapter draws upon qualitative research involving first-hand field
observations and semi-structured interviews with high-level officials of state government and state planning agencies; big real estate developers specializing in IT projects; multinational and Indian IT company executives; and civil
society activists. Each of the interviews involved in-depth discussions for between 45 minutes and one and a half hours. All together, 65 interviews were conducted over a four-month period, from December 2010 to March 2011. This chapter is organized as follows: the next section provides an overview
of the IT industry in India and its various sub-segments. The third section then focuses on the major national-level policy instruments impacting growth in the IT sector. Following that, the fourth section then takes up the framing of state-level IT policies, and how these have been influenced by local political cultures. The fifth section will then discuss how the national and state policies translated at the ground level, leading to the formation of IT clusters in Indian cities. The last section concludes the discussion with a summary.
