Looking behind India's tech boom
Published: 28 Jun 2005 16:50 BST
From blackouts to corruption
Still, challenges persist. With an estimated 600 additional cars on Bangalore's streets every day, traffic has ground to gridlock. The five-mile drive to Electronics City, the main tech hub, can take an hour from the centre of town. An express road that was supposed to have been completed last year remains a tangle of rebar and cement pilings.
Electricity is another pressing concern. In nearly every Indian city and state, power outages occur fairly regularly. The lack of an adequate power grid is one reason that no foreign company has built a semiconductor fabrication facility in the country. A South Korean entrepreneur has signed a preliminary agreement to build a chip foundry near Hyderabad, but many sources privately doubt that the project will get far, because of the water and power demands of a modern fabrication plant.
"The government realises that there needs to be foreign investment" in infrastructure, WestBridge Capital's Navani said, adding that development funds are being negotiated with large banks.
Tech companies also routinely complain about India's tax system. On the plus side, the onerously large import duties of the past are fading away, and the government has passed laws requiring the equivalent of benefits offered by places like China and Taiwan, including one that gives companies exporting tech products a 10-year exemption from income taxes.
Yet executives are well aware that the government has a history of adding taxes through its national budget, as exemplified recently with a so-called fringe benefit tax. Under this provision, companies that throw parties for clients or host them at conferences must pay a tax on the expenses, said Ravi Pradhan, India manager for Via Technologies.
Moreover, as in other parts of the world, corruption remains a problem when it comes to influencing clients and government officials. "In America, you might take them to the Super Bowl. Here, you give them money," one source said.
And even for Indian entrepreneurs who know how to navigate the unofficial ways of doing business, help from multinational manufacturers is still necessary to build their industry.
"We have engineers who are good technicians, but we need product managers," said Vinod Dham, founder of NewPath Ventures, a venture capital firm that specialises in Indian investments. The services business, he added, has "made a culture of people who say, 'Tell me what to do.'"
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