CIT 2002 throws up issues that block IT growth in Gujarat

Suneeta K
07 January 2003

There are problems, there are opportunities and there are lessons to be learnt… And the bright side to the story is that IT centres other than Bangalore, Hyderabad and Pune are to flourish.

One of the major requirements, as pointed out by CII director-general Tarun Das, is that in order to become a strong player in the IT sector, states like Gujarat that have the inclination to step into the IT arena need to focus on human resources, integrate the expertise of institutions like IIM, EDI and NID with business, and create a feel-good factor for investors from outside the state, national as well as international.

There is a large potential for tapping the software requirements of the domestic, small and medium enterprises as well as overseas companies. Listen to Das: “Over the next decade, there is going to be a major shift of IT and IT-enabled services (ITES) from high-cost countries like the US to cheaper destinations like India. India will become the global hub for IT services in the future. But exports will not be smooth as there will be opposition from within the US, Europe and Japan due to the slowdown in their economies.”

Gujarat already has several advantages as far as attracting investment is concerned. These were summed up by Bharat Desai, chairman and CEO of the $172-million Syntel Inc of USA, who said Gujarat should focus on its unique strengths like business acumen and ability to overcome odds.

Commenting on the business models of today’s IT companies, Chirag Mehta, chairman of CIT and also managing director of Icenet, one of the state’s largest ISPs, said businesses today are driven by knowledge and not by wealth and inheritance. “Gujarat has four cell operators, three basic telephony operators, 25 operational ISPs, three call centres and a number of software companies. But a major problem faced by IT companies today is funding as banks are reluctant to fund and venture capitalists have become overcautious after the dotcom debacle.”

According to Mehta, if funding could be taken care of, not only would the IT sector grow but the growth in this sector would fuel growth in other sectors as well since just 1 per cent increase in tele-density leads to as much as a 3-per cent growth in the GDP. Funding has remained a major problem because banks do not want to expose themselves to the high risks involved in IT ventures.