Draft Report of the High Level Group on Services Sector

2.3.2 Infrastructure

The most important physical infrastructure needs of IT and BPO are power and telecommunications, but there is significant dependence on urban infrastructure including road transport as well. The personnel need to move speedily from their homes to workplace and they require good urban infrastructure for providing them with quality of life. Proximity to airports and good international air connections are also critical to enable them to travel frequently to foreign destinations. With all these facilities the industry requires office space. Tier 1 and 2 players need developed land to construct their own buildings but others need rented accommodation provided by developers in which they can move quickly.
Developments following the end of Government of India monopoly in public telecommunications resulting in large capacity creation by the private sector and significant decline in tariffs coupled with improvement in service quality have been one of the factors contributing to the growth of IT and BPO . The cost of E1 line for instance has declined by almost 50 % over the past five years and is expected to reduce further and reach international levels. Large capacity expansion by a number of players has established a strong framework of planned redundancies, thus ensuring continuous network connectivity. Telecom is one infrastructure service in which no impediment is foreseen in the expansion of IT and BPO services . There is only a data protection related handicap created by restrictions in connectivity of home telephones, which inhibits the qualified homemakers from joining the workforce in their spare time.
The quality and quantity of power remains a major problem all over the country (except Chennai and Kolkata to some extent) and the need to have private generation and back-up resources units increases the cost. This problem is not specific to IT and BPO and needs to be addressed by the Central and State Governments for the improvement of all sectors of the economy.
On the air transport front huge improvements have already taken place in international connectivity due to the adoption virtually of Open Skies policy and domestic deregulation has led to the growth of private domestic airlines, which have not only increased the frequency of connections domestically but also resulted in reduction of fares. Problems remain in airport infrastructure due to congestion arising from rapid growth of traffic, but these are receiving due attention. New green field airports at Bangalore and Hyderabad will be ready in March 2008, and the existing one at New Delhi will be expanded and modernised by 2010. A concession has already been given to a private sector developer for Mumbai airport and a DPR is being prepared for the construction of a new airport at Navi Mumbai. Chennai and Kolkata as well as 48 non-metro airports are being modernised by the Airports Authority of India.

Bangalore has witnessed a sharp deterioration in urban infrastructure while at the same time rents and the price of land have gone up. The scope for building additional commercial space in the five tier 1 cities, New Delhi, Bangalore, Hyderabad, Mumbai and Chennai is becoming increasingly difficult, even as the preference of industry remains to have new office space near these cities, because of availability of business infrastructure, residential space, health care facilities, educational institutions, facilities for entertainment and recreation, civic amenities, public transport and domestic and international connectivity. The challenge is to add commercial office space at the estimated rate of 25 million square feet and obtain commensurate expansion of business infrastructure, residential space and other amenities and facilities every year to keep pace with the demand.