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00:00This is a story about Ali Gay, and that is a word meaning progress in Canada, the language spoken here
00:05in Bangalore.
00:07Bangalore is the third largest city in India, much larger than New York City,
00:11and some people refer to it as the Silicon Valley of the country because it is home to the booming
00:16tech sector,
00:17a sector that includes the IT global services company Infosys.
00:23NASDAQ, the stock market for the next hundred years.
00:26The world that we entered when we listed on the NASDAQ in 1999 was a very different world
00:32because even though growth was fast-paced, it's much slower than now.
00:39It was at the height of the dot-com era, and as the CFO of Infosys when it went public,
00:45Mohandas Pai was at the center of it.
00:47India was well on its way to establishing itself as the information technology support capital of the world.
00:53It took time because we entered the market when the PC revolution was going on.
00:59Till then it was a mainframe economy, then became AS400, the smaller machines,
01:05then the PC economy, then the internet boom came, then we had the enterprise solutions economy.
01:10It was slow-paced, and change took time.
01:12If you look at the tech ecosystem in India, I would say it's an outcome of three things.
01:18One, unintended policy consequences.
01:22Second, conscious policy interventions by different governments.
01:27And third, exogenous shocks in demand that came from the West.
01:32Deepa Mani is a professor at the Indian School of Business.
01:36Very early in the 50s, the government of India said that we, you know,
01:40they passed the Employee Provident Fund Act, which required companies to pay Provident Fund at scale.
01:50Now, when you had to do this, this Provident Fund Act created a lot of indigenous demand
01:56for electronic data processing, because now you had to, obviously, you know,
02:03track the Provident Fund payments you were making, process it at scale,
02:06distribute it at scale, all of this created significant demand for electronic data processing.
02:12So those were the origins of some of the early firms in, you know, in the IT services space.
02:17A tech ecosystem that was once dominated by multinational companies
02:21and a few big consultancies like Tata and Infosys,
02:25has given way to a vibrant industry that supports the world's innovation while creating its own.
02:31Tech is a large part of what is happening in this country.
02:34We have probably the largest software service export industry in the world.
02:39Last year, we exported $245 billion of services to the globe.
02:4360% of global outsourcing comes here.
02:466 million people are employed in the software export industry.
02:51So now we're seeing the rise of the innovation economy
02:55where people are creating products for the global markets and their local markets.
02:59It started with B2C, then went to B2B, and now it's coming to deep tech in multiple areas.
03:06And we are seeing this growth.
03:07They created about $700 billion of value.
03:10We've got about 60 listed companies which are now raising capital and growing.
03:15So we're seeing a very new wave of innovation coming up in India,
03:20led by younger people, and led by, not surprisingly, I would say,
03:25people who worked in big, big tech companies from Oasis, like Intel, like Qualcomm,
03:31and others, leaving the company and starting their own startups.
03:35Bengaluru, or Bangalore, as it's commonly known, is now the tech powerhouse of the country.
03:40It is the capital of the South Indian state, Karnataka,
03:44where services account for 70% of the local economy.
03:48Agriculture and manufacturing bring in just 11% and 19% respectively.
03:53Bangalore is known as the Silicon Valley of India, right, and of the East, right?
03:57And there are reasons behind it.
03:59So one, of course, is I think you can actually speak about some of the biggest organizations
04:03which emanated from Bangalore.
04:06And I guess it's the weather, it's the culture, it's the people, it's the ecosystem.
04:13Nitesh Agarwal is the chief strategy officer of Tech Mahindra.
04:17He has spent most of his professional career in India's tech capital.
04:20It's not just the companies in India who were looking at setting up this business opportunity.
04:25Even the international firms realized the potential that Bangalore had,
04:29and therefore come in and set up their GCCs, right?
04:31So today, that is why Bangalore deserves the title of the Silicon Valley of the East.
04:36If you think about some of the largest firms which got set up in the so-called IT consulting industry,
04:42they were from Bangalore, right?
04:44And so therefore, what happens because of that is there is a lot of wealth generation that has happened in
04:48Bangalore.
04:48Then it's a self-sustaining process, right?
04:51Or a self-funding one.
04:52Because VCs today are very active in Bangalore.
04:55That means today, if you want to set up a new startup, right?
04:59Bangalore and maybe Delhi are the two options, right?
05:03And so therefore, naturally, what happens is one factor leads to the other.
05:06And that's why Bangalore still retains that crown of being the capital.
05:11Bangalore and the tech sector are at the core of India's economy,
05:14accounting for about 55% of the entire country's $4 trillion GDP,
05:20compared to 27% for industry and manufacturing and 17% for agriculture.
05:26The country is growing on the back of the tech sector.
05:30But the jobs themselves come from the rest of the economy.
05:33Roughly about 45% of the workforce is in farming.
05:36But the very high-tech, formal sector labor force is way less than 10%.
05:42So tell us about the National Council.
05:45Sanalde Desai is a demographer at the National Council of Applied Economic Research.
05:50She says the imbalance in employment and population
05:54is redrawing the lines of the power dynamics in the country.
05:57So a lot of states in the South are now getting northern workers
06:01coming in to work in their factories, on their plantations, and so on,
06:06particularly because the southern population is slowly becoming older.
06:11And they need a continuous influx of younger workers.
06:15So the migration trend is increasing.
06:17You said that, in general, the northern part of India
06:20is growing faster than the southern part.
06:22Does that necessarily lead to changes politically with representation
06:28so that the north would have more and more representation
06:32and the south perhaps less?
06:33So the current representation in parliament
06:37has been frozen based on 1971 census until 2026.
06:44Now there is a new census ongoing,
06:47and this census could be used to restructure the representation,
06:51which would increase the proportionate share of northern states
06:55versus the southern states.
06:58And this is of great concern to people in the South
07:01because there is a sort of a feeling that,
07:03look, we made an effort to improve the health status of our children,
07:08leading to reduction in fertility,
07:11and now we will be punished for it
07:12by losing the central representation and power.
07:16While this is happening,
07:18actually the economic power of the South is growing.
07:21So now we have this interesting contrast
07:24where southern states have more economic power,
07:28but they may have lower political power.
07:31This is not a recipe for a happy future for Indian Union.
07:39Political power matters to the future of cities like Bangalore
07:42that depend on the country's central government
07:45to address some of its most pressing needs.
07:47The state where you are right now has got 67 million people,
07:51all right?
07:51And then we have a government in Delhi, which is a union government.
07:55But the challenge, David, is,
07:58being a poor country,
08:00you come to power by giving freebies to your voters,
08:04by giving free money, giving them subsidies, etc.
08:07So the challenge for any government is,
08:09between investing in development,
08:10investing for the future,
08:12and coming to power.
08:13So what do they do?
08:14They spend a lot of money giving away freebies.
08:17For example, the current government in my state
08:20is giving about $8 billion of freebies per year
08:23in giving free money to women,
08:25women and about maybe about 15 million women
08:29or 16 million women,
08:30and giving free power, etc.
08:32So they're not investing enough in innovation.
08:35Feeding the beast of India's innovation engine
08:37requires a lot of capital,
08:39which the government can facilitate
08:41through business-friendly policies.
08:43We hire 150 to 200,000 people in technology every year.
08:48Every year.
08:49Pai says there's more work to be done.
08:51They've got restrictions,
08:53tax restrictions on where they can invest.
08:55They can not even invest in funds,
08:58alternate investment funds right now.
09:00In America, the endowments invest,
09:02the insurance companies invest, right?
09:04Family officers invest,
09:05tech entrepreneurs invest.
09:06We don't have that ecosystem.
09:08And the government in Delhi is trying to fill it up,
09:11but it's inadequate.
09:12For example, the government of India
09:14and the state government give about
09:16$110 billion of subsidies a year.
09:19It's very large for poor people.
09:21But they're not even investing
09:22$6-7 billion in innovation.
09:25When I say innovation,
09:26it's funding for startups and for venture capitalists
09:28to create the innovation system.
09:30So both are doing work.
09:32I wish the state governments do more.
09:34For example, in my state of Karnataka,
09:36we export $130 billion of services a year,
09:40$100 billion of software,
09:4240% of all software exports,
09:44$30 billion remittances come here from people.
09:46But we're probably investing
09:48maybe $20 million or $30 million in innovation.
09:51Because the political leaders don't get it.
09:53They don't understand
09:54that you have to invest for the future also.
09:57They're more focused on providing for people
10:00who are the voters who are poor,
10:01coming to power, playing politics, etc.
10:03Pai and some of his corporate peers
10:05have also been outspoken
10:07about just how much is at stake for Bangalore.
10:10As the city fuels the country's growth ambitions,
10:13it struggles to support the physical growth
10:15that must come with it.
10:17Bangalore is the sixth best global tech city,
10:20but has the second worst traffic congestion in the world.
10:24According to TomTom Traffic Index,
10:25it takes 15 minutes to drive
10:27just two and a half miles
10:29or about four kilometers.
10:31So Bangalore is a very special city.
10:33So they're a very welcoming city to outsiders.
10:35People come from all over.
10:36Bangalore suffers from prosperity.
10:38Have you heard of anybody suffering from prosperity?
10:41Because we got 2.8 million cars.
10:45People buy cars.
10:46They buy one car, two cars, three cars.
10:47They buy bigger houses.
10:49You know, we got 205 million square feet
10:51of grey-day office space.
10:52I would say Bangalore has grown and, you know,
10:55there are waves, I would say, of that, right?
10:57Because what tends to happen is that, you know,
11:00I would say infrastructure
11:01and largely government-led interventions,
11:03they tend to trail what the private sector does, right?
11:06And so Bangalore has had its waves
11:08of where you suddenly felt that it was overheated.
11:11And then, of course, what happens is that, you know,
11:14politics eventually catches up
11:15or infrastructure development eventually catches up.
11:17As a local Bangalorean, I would like to believe
11:19that, again, we need that next wave
11:21of infrastructure which has to come in.
11:23And so, therefore, maybe a few other cities
11:24are benefiting because of that.
11:27Some of Bangalore's fiercest competition
11:29comes from within India,
11:30from cities in neighboring states
11:32that have seen economic success,
11:35but also its side effects.
11:37And so, event.
11:39Thank you for a delight.
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