The Hindu Business Line : Poor infrastructure, a speed breaker: Karnik

The software industry's apex body, Nasscom, feels that a radical solution, such as building of townships, needs to be considered given the constraints facing the IT industry.

Addressing journalists of The Hindu group, Mr Kiran Karnik, President, Nasscom, said, "We need to build new cities, on the lines of Rourkela and Bhilai, with high-class facilities (ranging from) research and development institutions (to) housing and integrated with the nearest international airports through high-speed corridors. There is a queue of real estate people waiting to invest here."

He added that these would have to be accompanied by a proliferation of good quality schools and hospitals in the area. It may be recalled that in an earlier report, McKinsey had indicated that by 2010, the industry would need to employ one million workers in at least five townships near major cities and six lakh workers across other towns.

More problems

Asked if the Special Economic Zone (SEZ) scheme did not address some issues that the IT industry faces, Mr Karnik said, "SEZs had the potential to lead us to such solutions but now, they are not being looked at in that way at all," meaning that the scheme had created more problems than it solved, in the view of the IT industry.

He added, "We hope that in the next few weeks, and certainly within the next few months, these would be resolved, since companies are in a dilemma, as to whether they should locate new units within an STPI or an SEZ." Companies in the IT industry currently enjoy tax benefits, within the Software Technology Parks of India (STPI) scheme, which ends with 2009. Only those companies that plan new projects can locate them in SEZs and enjoy those tax benefits. Concerns for software companies include, "requirement by the government to have walls of a certain height with barbed wire." According to Mr Karnik, "Rules such as these are apt for the manufacturing industry. The IT industry works over the wires, so physical requirements are not applicable." In other words, irrespective of location, a company should be able to enjoy SEZ benefits, as in the case of STPI, so long as you follow the rules.

"In a service industry, work is moving to where the people are, not the other way around. SEZ seems to work from the opposite premise."

Educational system

Mr Karnik also called for radical thinking by governments to change the educational system. "The reason why the IT industry is where it is today is that higher education was opened up leading to a proliferation of graduates. We need such solutions."

Citing human resource shortage as a factor that could ruin the show for India, he expressed concern over both the quantity and quality of fresh graduates. According to him, "On average, an IT company recruits only 3 per cent of candidates it considers." Even if the industry were to absorb all graduates, there would still be a shortage of manpower. He said, "We are now seeing 30 per cent revenue growth with at least a 25 per cent manpower growth. The university system is not growing that fast."

Manpower shortage

With other industries such as retail and automotive recruiting an increasing numbers of graduates and with the US looking to hike the number of H1B visas, manpower shortage in India is bound to increase, he said.

On infrastructure problems, he said, "That is a speed breaker compared to the HR issue, which could stop the show."

On the issue of quality faculty in engineering colleges, he said, "The IT industry, through attracting the best talent for its workforce, has contributed to this problem. It also reduces the number of people going in for an MTech or PhD."

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Poor infrastructure, a speed breaker: Karnik