Letter from Bangalore — Temples to innovation

Part Las Vegas and part 1990s Silicon Valley, the hi-tech hubs are fuelling India’s growth.

To step on to one of the 11 Infosys campuses across India, through the X-ray machines and past the security guards brandishing forms in triplicate, is to enter another world. Gilded and gated, these vast monuments to modernity don't look like India, sound like India or smell like India. This is not the India that most of the nation's 1.2 billion people inhabit.

Part mid-1990s Silicon Valley, part Las Vegas and part Dubai, the campus in Electronics City, Bangalore - one of India's main information technology hubs; the other is Hyderabad - is all glass and steel, pristine tarmac, manicured lawns and landscaped gardens where fountains spew out recycled water almost good enough to drink. Among the nondescript office blocks there is a pastiche of I M Pei's pyramid at the Louvre, which houses a media centre that only the BBC wouldn't envy, and another of Sydney Opera House, reinvented as a food hall.

This is all surpassed in scale and ambition by the company's 350-acre site in Mysore, about a four-hour drive south-east of Bangalore, in the same southern state of Karnataka. Ostensibly a training centre for recruits, the self-contained community boasts accommodation for 15,000 newly graduated engineers, shops, restaurants, a walk-in clinic, a full-sized athletics track, football pitch and cricket ground, a cinema that shows the latest films from Bollywood and Hollywood and seats more than a thousand people, and luxury two-storey villas for passing executives and potential clients.

Outside the faux Capitol building near the entrance to the campus, with its Romanesque columns and domed atrium, a worker squats in the sun, using what looks like a scalpel to remove a line of yellow paint. Nearby, two women brush leaves from perfectly symmetrical hedges. There is something both impressive and unsettling about this ersatz India.

These gated communities and others like them - owned by western as well as Indian hi-tech firms - are, to echo the words of the former prime minister Jawaharlal Nehru speaking about another era of innovation, "the temples of modern India". The country has recently been hit by terrorism, which might be why security is so tight. The fear of intellectual property leaking is the reason the security pass you are obliged to wear while on campus carries not only your name and photograph, but also the make, model and serial number of your laptop computer.

Not everyone is in awe of this new India, however. Some fear that it does nothing to promote social mobility and that it may even entrench class and caste inequality. Others have likened today's call-centre workers, and those responsible for managing and maintaining the personal computers of large western companies based thousands of miles away, to the lowly labourers from the age of empire. For coolies, read cybercoolies.

More of that later. First, marvel at the numbers. Information technology and "business process outsourcing" - an umbrella term that includes the much-maligned call centre - accounts for a quarter of all Indian exports. IT employs two million people and creates jobs for another ten million around the edges; the technology services sector is expected to grow by 23 per cent this year. In a country disappointed by growth that dipped below 8 per cent for the fourth quarter of 2010-2011 - at a time when western nations were desperate to avoid falling back into recession - the IT industry remains one of the most powerful engines of the thriving Indian economy.

Today, Infosys produces annual revenues in excess of $6bn, and it is not India's only IT success story. Last financial year, Tata Consultancy Services achieved revenues of $8.2bn and HCL Technologies $3.3bn. The Indian arms of major US firms such as Hewlett-Packard and IBM continue to prosper. And more than 180 Indian IT companies have invested in the UK.

Flat-earthers

It was no surprise that last July, when David Cameron made his first major trip abroad as Prime Minister, he chose India as his destination. No surprise, either, that he chose to visit Bangalore, home to a third of India's IT workers. It was on the Infosys campus that Cameron made his set-piece speech. "If Bangalore is the city that symbolises India's reawakening, then Infosys has a good claim to be the company that does the same thing," he said, shameless­ly playing to his hosts. (The occasion is now best remembered in Britain for his undiplomatic response during a question-and-answer session when he warned that Pakistan must not be allowed to "look both ways" on terrorism.)

Like other success stories, the tale of Indian IT has many fathers. The market liberalisation of 1991 onwards is one. Faced with a balance-of-payments crisis that left the country with less than two weeks before the money ran out, the Indian government agreed to relax trade and export controls. It at once became easier to do business at home and made Indian firms a more attractive proposition to the west. The days of the "licence-and-permit Raj" were over. At least that is how the story is commonly told.

And yet, to focus on this landmark in liberal economics is to ignore the role played by India's statist past. In 1950, the first Indian Institute
of Technology (IIT) was founded in Kharagpur, with the support of Prime Minister Nehru, and began teaching sessions in 1951. Six more IITs followed, producing, in the words of the New York Times columnist Thomas Friedman, "a phenomenal knowledge meritocracy". In his 2005 book The World is Flat: a Brief History of the 21st Century, Friedman describes India as "a factory, churning out and exporting some of the most gifted engineering, computer science and software talent on the globe". As of 2008, IIT alumni numbered 170,000 and the private sector has aped the institutes' success.

Then, in the late 1990s and early 2000s, India got lucky three times over. The first occasion was the millennium bug, which was expected to hit computer systems across the world the moment clocks struck midnight on 1 January 2000. To fix the "Y2K" bug - by replacing a two-digit representation of the year with a four-digit version - knowledge of ageing mainframe programming languages such as Cobol was required, as were thousands of man-hours of cheap labour. Second, the rise of the internet and the desire to exploit an emerging medium once again led to huge demand for inexpensive and effective programming skills. In both cases, thanks in no small part to the IITs bequeathed by Nehru, India was the place to go.

The third piece of good luck was the carpeting of the world's ocean beds with fibre-optic cable, paid for by US firms hoping to benefit from the internet boom. This offered the possibility of high-speed network access from anywhere to anywhere - and connected Indian expertise and labour to the world for the first time.

Friedman's eureka moment about the earth being "flat" came after a conversation with Nandan Nilekani, then chief executive of Infosys. Nilekani insisted that the world had been "flattened" by technology, and the more Friedman heard, the more convinced he became. "Clearly Nandan was right," he wrote. "It is now possible for more people than ever to collaborate and compete in real time with more other people on more different kinds of work from more different corners of the planet and on a more equal footing than at any previous time in the history of the world - using computers, email, fibre-optic networks, teleconferencing and dynamic new software."

For now, India is enjoying the fruits of the outsourcing boom, but others have a less rosy view of what is happening. One recurring criticism is that its IT industry lacks innovation: that the next big thing, a Google, a Facebook or a YouTube, is unlikely to come out of Bangalore, the critics say. That is certainly the conclusion of Angela Saini, author of Geek Nation: How Indian Science Is Taking Over the World. Saini toured the country researching her book, and although her overall assessment is positive, she believes technological innovation is not one of India's strengths. She concludes that the big Indian IT firms "capitalised on India's cheap and educated labour force to do workaday maintenance for western customers. Even now, thousands of software engineers are stuck in drone-like jobs, and this has made the industry slow at inventing products."

Measuring innovation is not easy, but how much a company spends on research and development and the number of patents it files are relatively good indicators. On both counts, as Saini notes, Indian companies compare badly with their US counterparts. Infosys has filed 300 patents for new technologies and products over the past four and a half years; IBM files more than 4,000 in a single year.

The new typists

Ruth Kattumuri, a software engineering graduate and former computer science professor, says that many Indian information technology workers of today are the equivalent of "the workforce who trained as typists in the 1970s to secure secretarial jobs". Now co-director of the India Observatory at the London School of Economics, she asks: "Do I think a majority of IT professionals are involved in brilliant software engineering? The answer is no. They're doing very mechanical work."

Kattumuri graduated in 1985, a rarity then in a male-dominated field, and recalls that historically school and university teaching involved a "process of rote and reproduction". She says: "While people are very good at churning stuff out, the type of training, the type of skills development, the type of teaching and curriculum has not been very good at encouraging creativity, freedom of thought, critiquing and innovation." Only now is India, producer of entrepreneurs, introducing the culture of questioning that is essential to produce great innovators.

There is a countervailing view, however. It was Chandigarh-born Sabeer Bhatia who co-created the email service Hotmail and then sold it to Microsoft for $400m in 1997. And according to the IIT alumni association, one in every five start-ups in Silicon Valley, California, was founded by IIT graduates. Back home, Indian firms are moving to more knowledge-intensive specialisms, such as consulting and systems integration and, in a quirk of globalisation, are setting up their own outsourcing divisions in China and elsewhere.

A further criticism is that where some see meritocracy, others see social advantage and privilege being perpetuated. A 2007 study by the social anthropologist Carol Upadhya suggested that the "composition of the IT workforce is more homogeneous than is often supposed", and that it is "largely urban, middle-class and high/middle-caste". Her paper Employment, Exclusion and "Merit" in the Indian IT Industry comes with a health warning - the sample size of 132 Bangalore-based software engineers is relatively small - but its results are striking nonetheless. Upadhya found that 80 per cent of those questioned had fathers with graduate degrees or higher, and 56 per cent had mothers with similar levels of education. Both these findings reinforced earlier research.

Great divides

Furthermore, the study found that 84 per cent of fathers were engaged in occupations that are usually identified as "middle-class". That 88 per cent of the sample group were Hindus is not especially surprising in a country where eight in every ten people adhere to that religion; but that 48 per cent were from the Brahmin caste does stand out.

I decide to put the findings to the test in an excessively air-conditioned classroom on the Infosys Mysore campus. Around the table are six articulate, self-possessed students in their early twenties - four women and two men. I request a show of hands, asking: "How many have parents who went to college?" Six hands shoot up. I am prompted to ask how many had grandparents who went to college, perhaps to prove that this is a recent, generational change. This time five hands are raised, rather undermining the supposition. Later, someone suggests to me that the only reason five hands went up was that the trainees did not want to lose face. That is possible, but the straw poll at least appeared to confirm Upadhya's findings.

I put this point to S D Shibulal, one of the seven founders of Infosys and the man who will become the company's chief executive next month. "In India, especially in the south, education is very common," he tells me. "I come from a state where every man, woman and child has gone to college."

This does not seem to chime with official government statistics, which put school drop-out rates by class 8 - around the age of 13 - at 43 per cent. Among the lower castes, the Dalits, the figure is 53 per cent and in tribal communities it is 63 per cent. A report last month in the Times of India noted that "the education system continues to suffer from four great divides. These are - rural-urban, men-women, rich-poor and between castes."

All of which signals that a highly desirable job as a software engineer or developer is off-limits for most. Consider that less than 2 per cent of students in India get a technical education, or that, in a country where the per-capita income is $1,265 a year (£790), the annual cost of enrolling a son or daughter in a government-run technology institute is typically Rs19,989 (£280). To do the same at a private institution costs Rs38,675 (£540).

Shibulal, who is now in his mid-fifties, offers a robust defence of the system. Referring to the trainees I met the previous day, he says: "Out
of those six people, [their families] would not have been middle-class when I was growing up. So their parents have benefited from the growth." And I gather that 40 per cent of Info­sys employees have at least one parent who dropped out of school after class 10 - between the ages 15 and 16.

So, does he think his industry is helping to create a more socially mobile country? "The 30-million-strong middle class of the mid-1980s can't have become 300 million just by multiplication," he insists. But some people, I counter, will always be excluded.

Shibulal looks up, his back to his office window, which looks across the huge site that is home to 20,000 workers and some of Indian technology's finest minds. "That," he says, "is a universal problem."

Jon Bernstein is deputy editor of the New Statesman