Why companies will come to Bihar?

In the many parts of India the infrastructure has been developing rapidly in unplanned manner and not able to meet the drastically increasing demands. You may have to spend hours to drive through one kilometer stretch in peak hours. There is no chance of undo and redo. Under these conditions the backwardness of Bihar can be proved as blessing in disguise. If Bihar or any such state can provide specific solution to this, it will become a major destination for outsourcing in no time.

In this post I am going to discuss four quotes from diversified sources.

Quote 1:
In Forbes article on 29-Feb 2008 Sramana Mitra, US Silican Valley Entrepreneur and Strategy Consultant writes:
The cost advantage for offshoring to India used to be at least 1:6. Today, it is at best 1:3. Attrition is scary. Forbes recently published some scary statistics on wage inflation in India. Salaries rose 15.1% in 2007, up from 14.4% the previous year. The 2008 forecast: 15.2%. This would be the fifth consecutive year of salary growth above 10%. Add to that the appreciation of the rupee against the weakening dollar, and its impact on the labor arbitrage market. Is the death of Indian outsourcing all that far off? Assuming a 15% year-to-year salary hike rate, and a 2007 cost advantage of 1:3 in favor of India, if U.S. wages remain constant, India’s cost advantage disappears by 2015. Then what?

Though Becuase of the recession in 200-2009 hikes were rare in the industry and some even got negative hikes. But things are becoming normal again and industry is giving hikes in two figures to retain its employees.

Quote 2:
“Every morning I go from Delhi to Gurgaon. This place is designed for foreign companies with huge industrial areas. They have built this beautiful office area where most international players are present but unfortunately they missed building roads, so it is difficult to get to your building. There are 150,000 people working there but nobody can reach their office easily. And this has been the case for the last four years. In Korea it would have been a matter of national shame.” - Andreas Schaaf, president of BMW India, Forbes India

Delhi, Noida, Chandigarh, Kolkata, Mumbai, Chennai, Hyderabad, Bangalore - All the cities tell the same story. Cost of living is high. Salary is increasing. Infrastructure is becoming insufficient. The cost Lands/ apartments in outskirts costs a fortune, thanks to the corrupt nexus between land mafia and politicians.

In Bangalore, the value of dry agricultural land adjacent to a main road was Rs 50,000 per acre till February 29 , 2008. But from March 1 , 2008 , it has become Rs 15 lakh per acre. Now if you want to buy a residential flat in that area, you may end up paying not less than Rs 30 lakhs for a 1000 sq ft.

Why government is taking lands from farmers on a bare minimum price and giving it to corrupt nexus of politicians and land mafias? Eventually we have to pay throat cuting price just for a small flat. To pay that huge amount we end up paying huge loans. We pay huge interests and get trapped in endless loop. Bank give loans at 7% floating and in few months they increase the rate of interest to 14%. On the other hand farmers loses their lands. Instead of cultivating grains and vegetables, buildings are getting constructed. Now grains and vegetables need to be imported from other remote districts to fullfill the demand. Increased patrol price adds on the transportaion cost and no wonder the grocery cost become high with eventually increases the cost of living.

We as a common person, are getting skimmed by everyone. Government, realtors, financial instutions, inflation, healthcare, transports, taxis, autos, airlines, entertainment(PVR, music, movie), restaurants (Pizza huts), clothings, super malls, higher cost of living everyonbe having a cut on us.

Quote 3:
India Graduates Millions, but Too Few Are Fit to Hire.
India—Call-center company 24/7 Customer Pvt. Ltd. is desperate to find new recruits who can answer questions by phone and email. It wants to hire 3,000 people this year. Yet in this country of 1.2 billion people, that is beginning to look like an impossible goal. So few of the high school and college graduates who come through the door can communicate effectively in English, and so many lack a grasp of educational basics such as reading comprehension, that the company can hire just three out of every 100 applicants.

Here is another opportunity. How can we produce such workforce who can fulfill these demands?

Education system requires a major facelift. How we will address the shortage of quality educational infrastructure, institues and teachers?

Connected infrastructure and teaching using video conferencing can provide effective solution to the shortage of teachers and deliver quality education.

Imagine there is a pool of experts delivering their lecture/training/teaching from far away. This is already been happening. Many self-motivated well wishers of Bihar like Chandrakant Singh of Gurukul Foundation is already making is happen. The need is to make it centralized and then broadcast over internet to each school/college.

Quote 4:
"India’s success in the export of Information Technology (IT) Software and Related Services over the past decade is well known. India now accounts for 65 percent of the global market in offshore IT and 46 percent of the ITES market. A majority of the Fortune 500 and Global 2000 corporations are sourcing IT‐ITES from India. The growth of the sector has led to tremendous pay‐offs in terms of wealth creation and generation of high quality employment as well as by increased demand for commercial and residential real estate, catalyzed urban development, and played a significant role in driving demand for other commercial services such as retail, hospitality and transportation, etc. However, this rapid growth and the associated developmental impacts have mostly been confined to a handful of IT‐BPO hubs located in a few states. Bihar has largely been bypassed by these exciting developments." - Bihar
Draft-IT-Policy-2010

The billion dollor question is why companies will come to Bihar?

As Boston based Satish Jha the Chairman of One Laptop Per Child says:
Its unfortunate that we start to plan for the past. It does not help Bihar to consider imaging the body-shopping back-offices to extend to Bihar as well. It’s a pity that what is past is a dream for a state. Bihar will not be created by those who are looking for job offers. Those seeking job offers come a bit after some entrepreneurs have laid a platform for them to come to. When “Big” companies choose to invest in Bihar, they will find a way to get folks to come there as well. That will happen when the Govt of Bihar is willing to offer decent incentives and a basic infrastructure etc. Even that seems to be a challenge as we have not mastered communication. Whether in Maithili or Hindi or any other language, the skills of even upper crust members of Bihar community are suspect. For English, the less said the better. As we speak, Patna cannot accommodate 1000 families that are used to a basic DDA housing quality of life available in Delhi or Bangalore, DDA flats cost Rs 2 crores and their rental is Rs 35000 pm. To create that quality in Patna one may spend less than Rs 20 lakhs. However, as soon as 1000 flats are demanded, the cost will jump considerably. The above line of argument stems from the inspiration of a couple decades ago. In order to progress, Bihar has an opportunity to rethink about itself. In a 15 year perspective plan, one may need to address the following:
1.Education
2.Healthcare
3.Infrastructure
4.Education
5.Healthcare
6.Infrastructure
7.Roads
8.Power
9.Water
10.Transport
11.Sewage
12.Internet
13.Public Health
14.Governance
15.Crime free Swift justice
16.Empowered citizens
17.No harassment

If Bihar or any other state can provide solution to these radical issues, it can become a number one destination for IT outsourcing in no time.

Quote 5:
" More than 95 % of India's exports originate from 9 Tier-I cities whose infrastructure is heavily constrained. Recommended move to Tier-II/III has not gathered momentum. Competition from at least 25 to30 other low cost countries could reduce India's market share by 10 percent. China, Phillippines, Eastern Europe and other emerging economies are undertaking bold initiatives to grab India's share." - NASSCOM Perspective 2020 report.


Tier-II/III cities have golden opportunity to provide an ecosystem with excellent infrastructure and low cost resource and job will start to flow there.
Can Bihar accomodate 1,00,000 IT/ITES professionals in next 5 to 10 years?

A separate IT city is required with International Airport. Affordable townships should be developed near the IT city. Public infrastructure planning is required to control the traffic and also point to point public transport facilities is required. Strategies are required to keep the cost of living under control. Need is to learn, recognize opportunities and quickly plan and build an IT city with infrastructure, roads, trains, metro, IT parks, telcommunication, housing, sanitations, school, malls, cinema halls, govt offices, kiosks, banks etc.

How Bihar can address the radical issues what other destinations going through?

There is pontential to attract big companies to invest in Bihar because of few reasons below:
1. Brand Bihari – Biharis are well known for their intelligence, hard work and loyalty
Updated based on news in Dec 2011.
"Engineers from Delhi and Bihar are the best when it comes to IT product, IT services, KPO, BPO, software testing and hardware networking roles, according to a survey. The National Employability Study 2011 by Aspiring Minds after analysing the employability scores of over 1.2 lakh final year engineering graduates reveals that while Delhi engineers are the best when it comes to IT services, BPO, KPO, software testing and hardware testing, engineers from Bihar (including Jharkhand) were the best in IT product roles where Delhi engineers come a close second."

2. Human resource – A huge pool of computer science and engineering graduates like BCA, MCA, B. Tech etc. and other English speaking graduates are available. This fits into the growth strategy of IT, ITes and BPO companies.

3. Cost effectiveness – Cost advantage in terms of low cost human resources, real estate price, tax benefits etc.

4. Connectivity – Patna the capital of Bihar is well connected by train/flights with all major cities.

5. Future growth – Bihar is expected to grow rapidly in coming years

In 2008.2009 with vision to form an Infosys in Patna, we worked on a Project Plan to start a company for Software Development and Information Technology Enabled Services with ambitions to start with few hundred professional and recruit 5000 professional in next few years followed by exponential growth to 100000 within 5 years. I personally visited the Biscomaun Bhawan in Patna which is declared as IT Park by the state government of Bihar. Not to my surprise, it was stinking and full with garbage and filth like any other office premises there. I contacted state government officials to discuss the IT policy posted at the state government website (http://gov.bih.nic.in); I was told that the policy is still in draft version hence not applicable.

As of now the IT policy is still in draft version. Though it has evolved from year 2008 version to 2010 in 3 years. What a pity?

Updated in Jan 2012:
Finally we have IT Policy! Later is better than never!

State Investment Promotion Board (SIPB) Bihar serves as the Single Window Agency for project approvals. Try googling about it, you will not find much meaningful information like contact, address, how, what, functions, procedures, clarification etc. A dedicated website would be required backed by powerful workflow system. So that investment proposals can made online and tracked till closure. A dedicated call center with online chat will help and attract startup investors as well.

Harassment is another hurdle. A close friend (a techie from IIT and have many patents on his name) approached government for land allocation near Patna for his educational institution project, he was asked to pay unreastically high price. He moved his project to a remote dark age village where it is successfully running and appreciated even by World bank.

Chaitanya Gurukul's integration of technology and web content into education are building a strong case for innovation in getting effective education to the most remote and poor corners of India. -- World Bank

In August 2008, Bihar Revival Forum dreamed for Infosys, Wipro, TCS, Bosch, Oracle, Accenture in Patna. Within six months it started to happen when Infosys showed interest.

We feel sorry to say that with ongoing kind of inactive attitude nothing significant can be achieved. Invitation for investment is not enough, serious ground work and sincere preparation need to be done in advace with vision for next 20-50 years. Swift planning and prompt action is required.


Regards,
Amitabh
Bihar Revival Forum