Gov’t ouster leaves IT jittery in South Indian state

The government of Chandrababu Naidu, the tech-savvy chief minister of the South Indian state of Andhra Pradesh, was defeated Tuesday by a landslide, making the IT industry, including a number of multinationals with operations there, a trifle jittery.

Naidu’s folly was that he mollycoddled IT companies while ignoring the rural masses, numbers of whom committed suicide because of severe poverty during a drought, according to analysts.

“The lesson that could be perhaps learned from this election is that even as you focus on one area like IT, you need not ignore other pressing issues like a drought in the state,” said Sudip Banerjee, president for enterprise solutions in the Wipro Technologies division of Wipro Ltd., a Bangalore, India-based software services provider that has a development centre in Andhra Pradesh. “It wasn’t an either-or kind of situation.”

During his tenure as chief minister of the state, Naidu was courted by technology multinationals and Indian companies to which he extended subsidies and other facilities to set up their software development and business process outsourcing (BPO) operations in and around the state’s capital city of Hyderabad.

“The subsidies were not the incentive for us to set up operations in Andhra Pradesh,” Banerjee said. “It was the proactive approach of the government, the speed in getting clearances, quick implementation and the ease with which the chief minister and his officers could be accessed.”

But even as he was generous with technology companies, Naidu, at the behest of the World Bank, cut off subsidies to the rural economy of the state, for things such as electricity and food. A number of farmers, steeped in debt, committed suicide, as the drought-stricken land failed to deliver a means of livelihood. Even as the rural sector suffered, Naidu, who had become an icon of progressive India, continued to attract information technology companies to set up operations in Hyderabad.

Microsoft Corp., for example, set up a software development centre there, breaking the trend of multinationals setting up centres in neighboring Bangalore. A meeting with Naidu, who also had strong clout in the federal government, was usually on the agenda of visiting IT leaders, including Bill Gates, chairman and chief software architect of Redmond, Washington-based Microsoft.

Kuppam, Naidu’s own constituency, was used as a test bed for a number of digital divide pilot projects, taking technology to the rural masses, including projects by Hewlett-Packard Co.

Naidu played an important role in promoting not only Andhra Pradesh but the whole IT industry in India, according to Kiran Karnik, president of the Delhi-based National Association of Software and Service Companies (NASSCOM).

“He helped to create an enabling environment for the industry to flourish in India, and has endeavored to put information technology to use for providing better quality of governance,” Karnik said.

After Tuesday’s defeat of Naidu’s government, the continuation of his IT initiatives, including e-governance projects, are in question as the new government will most probably focus on rectifying the imbalances in the rural economy.

The e-governance projects won’t be dropped, though they may languish, according to analysts. Nor will multinationals, which have set up software development and BPO subsidiaries in the state, move to other locations. The special treatment for IT companies may, however, go, as Naidu prepares to sit in the opposition, the analysts said.

“I used to get a meeting with Naidu quickly, sometimes within a day,” said an executive at a technology company, who declined to be named. “I am not sure the new chief minister will be as accessible.”

But NASSCOM’s Karnik does not expect Naidu’s defeat to affect the IT industry in Andhra Pradesh. “We are certain that the new government in Andhra Pradesh will continue its strong promotion of the IT industry, and NASSCOM looks forward to working closely with them,” he said.

Wipro’s second development centre in Andhra Pradesh will be in operation in July, and the company does not intend to change its investment plan, Banerjee said. Although a new government in Andhra Pradesh may have other priorities than IT, it will not undo the progress Naidu has done in the area of IT, he said.

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