Bloomberg News

India’s Silicon Valley Adds Rail as Jams Threaten Tech Grip

October 14, 2011

(Updates with closing share price in 16th paragraph.)

Oct. 14 (Bloomberg) -- Bangalore, India’s Silicon Valley, will open the first section of a $1.7 billion metro railway next week as the city tackles congestion that has dented investment and made it the world’s second-worst for parking.

A three-car train will run on a 6.7-kilometer (4.2 mile) elevated track on the maiden trip on Oct. 20, according to the Bangalore Metro Rail Corp. The network will stretch to 42 kilometers by 2013.

“The metro project will be a game-changer for the city,” said Anshuman Magazine, managing director for South Asia at CB Richard Ellis Group Inc. “The metro should’ve been there before, but it’s still timely.”

Bangalore’s population has jumped almost 50 percent in a decade to 9.6 million as a temperate climate and a pool of low- wage software programmers attracted companies such as Infosys Ltd. and International Business Machines Corp. Roads and power systems have struggled to keep up with the pace of growth, creating opportunities for Chennai and Hyderabad to challenge the city’s grip on India’s booming outsourcing sector.

Bangalore’s administration “has to show it cares by providing better services like power and transport,” said Vinod K Nowal, president of the Bangalore Chamber of Industry & Commerce, and a director at JSW Steel Ltd. “There are now other states who are more aggressively attracting investments.”

Facebook Inc. last year opened its first India office in Hyderabad, about 570 kilometers north of Bangalore. The Palo Alto, California-based company didn’t immediately respond to e- mailed Bloomberg News questions about its choice of the India office location.

Colonial Rulers

Bangalore, which opened a new airport in 2008, had 554,000 technology workers in March 2009, about 25 percent of the country’s total, according to latest data available from the government. They mainly sat in Whitefield, a suburb that was once a settlement of India’s former colonial rulers, where companies such as Tata Consultancy Services Ltd., India’s largest software exporter, have set up offices.

The metro’s first phase will start from Baiyappanahalli in the city’s east, about 14 kilometers short of Whitefield. Once the network is completed, it will take 44 minutes to travel from the city’s north to south and 33 minutes between the east and west, according to Bangalore Metro’s website.

“I won’t think twice about giving up my car once the service starts,” said Krishna Murthy, who runs an industrial machinery company in the city’s north. “Now I take an hour to travel eight kilometers to reach my home.”

Boycott Threat

The city is the world’s sixth-most painful for commuters and worst for parking behind New Delhi, according to a survey of 20 cities by IBM. In 2005, technology companies threatened to boycott an annual industry event sponsored by the state to protest the city’s poor infrastructure.

Bangalore, home to Infosys and Wipro Ltd., two of India’s three biggest software companies, and IBM’s local unit, contributed 749 billion rupees ($15 billion) of software exports in the year ended March 2009, according to official data.

Still, software exports expanded at the slowest pace in four years in that year, as the global economy slowed and as other Indian cities won business. Bangalore’s 23 percent growth rate trailed a 29 percent gain for Chennai and a 25 percent increase for Hyderabad.

‘Preferred Destinatons’

Gurgaon and Noida near the nation’s capital are also becoming “preferred destinations” for technology companies, according to The Associated Chambers of Commerce & Industry of India, a New Delhi-based lobby group.

“When people look to make investments, the infrastructure is a big part of what they look at,” S.D. Shibulal, chief executive officer of Infosys, said in an interview in Bangalore. “The better the infrastructure, the better it is for attracting investments.”

The metro rail is owned by the federal government and Karnataka state, of which Bangalore is the capital. The project was funded by loans from Japan International Cooperation Agency and Asian Development Bank. A group of companies including state-owned BEML Ltd., Mitsubishi Corp. and Hyundai Rotem Co. are supplying the railcars.

BEML climbed 5.3 percent, the most since Feb. 14, to 514.70 rupees at the close in Mumbai trading. The BSE India Sensitive Index increased 1.2 percent.

The project is the nation’s first new metro system since Delhi Metro Rail Corp. started services in 2002. India is now stepping up investments in public transport as economic growth spurs record car sales, worsening traffic bottlenecks.

Billionaire Ambani

Larsen & Toubro Ltd., India’s biggest builder of airports and power networks, has won a contract to build a rail network in Hyderabad. Reliance Infrastructure Ltd., backed by billionaire Anil Ambani, is also constructing a similar project in Mumbai, the financial capital. Overseas trainmakers Bombardier Inc. and Siemens AG have set up railcar factories in the country while Alstom SA is building a plant.

India’s Planning Commission last year said the nation will need to spend $1 trillion on highways, ports, airports and utilities between April 2012 and March 2017 to support economic growth.

About 66 percent of Bangalore’s people are expected to use public transport for their commute in the city after the metro is complete, from the present level of 55 percent, according to the rail operator.

“Bangalore has been lucky in the past,” Richard Ellis’s Magazine said. “In spite of not having an international airport and not having an efficient public transport, it still got huge investments. But, you can’t rest on that for too long.”

--With assistance from Ketaki Gokhale in Mumbai. Editors: Vipin Nair,

To contact the reporters on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net; Tanya Ashreena in Mumbai at tashreena@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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