The unsustainable boom in India’s Silicon Valley
Over the past two decades, Bengaluru has seen explosive growth in its tech sector. But the city’s infrastructure is not keeping up with the expansion
Krishn Kaushik in Bengaluru and Chris Kay in Hyderabad
Traffic in Bengaluru has become notorious, an illustration of the country’s struggles to build the infrastructure necessary to maintain its development © Kanishka Sonthalia/BloombergIn parts of Bengaluru, the southern India city and tech hub, you could be mistaken for believing you were in Palo Alto.
The campuses for tech behemoths like Google and Microsoft, or Wall Street majors including Goldman Sachs or Morgan Stanley, feature multi-cuisine canteens, crèches and gyms much like their counterparts in New York or San Francisco.
But any confusion about geography would dissipate on the typical weekday commute, when it can take almost four hours to drive along the nine-mile stretch of road where some of the world’s largest multinationals have their offices.
And unlike in Silicon Valley, these swanky world-class offices lack access to piped water.
While most of these campuses have built water conservation units, they have to rely on a network of truck-mounted water tankers every day to fulfil the needs of the area’s million or so employees.
The overburdened Outer Ring Road business district is part of the wider upending of Bengaluru, formerly and still widely known as Bangalore, from a serene “pensioner’s paradise” with its mild climate to a concreted and congested megacity.
After welcoming a wave of tech industry investment, the metropolis has become one of the starkest illustrations of India’s struggles to build the infrastructure that will be needed to keep its economy growing at a brisk rate.
Bellandur Lake is the largest lake in Bengaluru, which faces profound challenges in regards to its water supply © Kanishka Sonthalia/Bloomberg
A metro station under construction this month in Bengaluru, which is struggling to alleviate its transportation problems © Samyukta Lakshmi/FT“This staggering growth was not foreseen,” says Manas Das, president of the Outer Ring Road Companies Association, which represents about 500 companies such as Adobe, Boeing and Intel, with offices in Bengaluru.
Das’s organisation has not only had to help some of the world’s largest corporations source water, but also lobby the city’s authorities to get to work belatedly to widen the roads and even convince them to extend a long-delayed metro line to the district.
“Once you enter into the tech parks you will see a different world,” says Das.
“The question is getting in and getting out of here.”
The issues facing Bengaluru are true of the larger malaise of India’s unplanned cities at a time when the government is betting heavily on continued expansion in its tech sector.
With manufacturing still lagging behind, India needs services, especially the almost $300bn tech industry, to bear the heavy load for its growing economy.
The country’s abundant cheap tech talent is attracting more multinationals to open what are called Global Capability Centres, making those pressures acute.
These centres employ hundreds of thousands of Indians to support various back-office and digital functions, becoming a new and crucial growth engine for the world’s fastest growing major economy as the global race in artificial intelligence heats up.
Of the more than 1,800 GCCs in the country, Bengaluru is already home to around one-third of them.
Between 2005 and 2023, India’s services exports grew six times from $53bn to $338bn and its share in global exports rose from around 2 per cent to over 4.5 per cent, while the share of merchandise exports remained below 2 per cent, according to Goldman.
But with tech services accounting for nearly half of service exports, and Bengaluru at its fulcrum, Goldman warned that the “resilient growth” of the sector cannot be taken for granted, with gaps emerging in tech talent and lagging investment in infrastructure posing a risk across various cities.
“From an environmental perspective, the growth in these sectors is putting pressure on the natural resources of cities,” it said in a report last year, stressing that “Bengaluru, which has the largest share of IT companies and GCCs in India, is facing a water crisis.”
In the first half of this year, 1.7mn sq m of office space, half the size of New York’s Central Park, was bought or leased in Bengaluru, accounting for more than a third of India’s total such transactions, according to real estate consultant Knight Frank.
This was more than new leases of office space in Bengaluru for the entire 2024.
That build-up has choked Bengaluru.
The city has become prone to annual flooding and its once benign climate is becoming noticeably hotter thanks to the reduction of its green cover and impact of climate change, with the city’s development severely lagging behind its population influx.
Some of the city’s most prominent residents have been openly critical.
Pharma billionaire Kiran Mazumdar-Shaw wrote on X last month that “the state plunders [and] kills the golden goose with no responsibility to provide basic infrastructure [and] civic amenities — building rules are flouted to make money”.
Another Bengaluru tycoon sitting inside a leafy company campus sighs in exasperation when asked about the strains on the city.
Pointing to the logjammed roads outside the office, he says Bengaluru’s administrators need to be placed on a “war footing” to sort it out.
A real estate chief executive says Bengaluru’s authorities “can’t plan for a moving target” and suggests an “embargo on leasing” for new offices.
TV Ramachandra, professor at Bengaluru’s Indian Institute of Science, questions who the unrestrained development benefits.
“If we are unable to supply the water, then why are we allowing the growth?” he says.
“What is the point in claiming that we are a mega growth engine and all?”
Any city has to be “liveable” and people should have adequate infrastructure and basic amenities, Ramachandra adds, with Bengaluru failing at both these.
“The citizens have lost the city.”
Born in Bangalore in 1958, TV Mohandas Pai grew up in a city of fewer than 1mn people that bears little resemblance to the one that houses an estimated 14mn today.
Once part of the royal kingdom of Mysore before British rule, Bangalore’s location atop a ridge in the Deccan Plateau blessed it with pleasant summers and mild winters, a contrast to the harsher extremes endured by most other Indian megacities.
It was a “small town, nice town, there’s no traffic, no cars, a few buses”, the 66-year-old chair of angel investor Aarin Capital recalls, as the din of traffic builds outside his central Bengaluru office.
“We used to play in the streets, go to the ground and play cricket, go to the library, cycle to college . . . go for long walks.
Very nice life, nothing happened.”
A Wipro office in Bengaluru. The IT company was founded as a vegetable oil maker in 1945 by the Premji family in western Maharashtra © Samyukta Lakshmi/FT
That began to change by the early 1990s, when the tech industry flocked to the city, then a sleepy military cantonment, university hub and home to a handful of state-run defence companies.
Even before India’s economy shook off the socialist “Licence Raj” restrictions, Infosys, now the country’s second-largest IT services company after Tata Consultancy Services, had shifted its headquarters to the city, lured by ample space and low rents.
Others followed, including IT rival Wipro, originally founded as a vegetable oil maker in 1945 by the billionaire Premji family in western Maharashtra.
The rapid ascent of the city’s outsourcing sector became a byword for India’s transformation and giddy economic opportunity.
It also sparked untrammeled building and property development.
In 1973, the city enjoyed green coverage over 68 per cent of its land — today 88 per cent of Bengaluru is occupied by concrete structures, according to a study published in July co-authored by Ramachandra at the Indian Institute of Science.
Successive state governments in southern Karnataka, of which Bengaluru is the capital, have blamed the IT industry’s explosive growth for the city’s snarling traffic and infrastructure gaps.
Pai, who joined Infosys in 1994 and became a key figure in India’s IT services sector as its chief financial officer and head of human resources over a 17-year tenure, counters that the state’s administrators are at fault.
“They’re not investing enough,” Pai grumbles, as he rattles off an array of statistics on the city’s growing number of start-ups, tech workers, as well as cars clogging Bengaluru’s roads.
“Our infrastructure is 15 years behind schedule — states in India don’t know how to handle prosperity.”
Other industry leaders suggest that electoral calculations are at play.
Unlike New York or London, where the mayors are their political champions, political identities of Indian cities like Mumbai, Hyderabad and Bengaluru get drowned in regional politics controlled by the governments of Maharashtra, Telangana and Karnataka states, respectively.
“Indian cities don’t have political clout,” says one tech executive, pointing out that Bengaluru only accounts for 28 of Karnataka’s 224 seats in the state’s legislative assembly.
“You neither have a strong mayor, nor do you have a strong presence in the assembly, so the concerns of the politicians are not the city, but it’s a good place to make money.”
Karnataka’s IT minister Priyank Kharge tells the FT the state’s government is aware of the problems and is taking action.
“We need to pull up our socks on a lot of issues plaguing the industry, but that’s a problem with every growing city,” he says.
“We are also encouraging people to go beyond Bengaluru.”
But it is an “uphill task” to convince many residents, Kharge says.
“The problem is people love Bangalore.
People love the weather, people love the social life that comes with it.”
Other cities across India are capitalising on Bengaluru’s mounting problems. N Chandrababu Naidu, chief minister of Andhra Pradesh, recently told the FT that he wants to create a fresh “Quantum Valley” in a new capital he is building in his southern state.
More established metro areas, including Pune, a few hours’ drive out of India’s crammed financial capital Mumbai, as well as Delhi’s satellite cities of Noida and Gurgaon, are drawing in tech industry investment and multinational companies that are setting up GCCs.
But many regard Hyderabad, about 350 miles north from Bengaluru, to be the most serious contender to India’s tech crown.
The city is the capital of Telengana, a decade-old state whose successive governments have relentlessly wooed investment.
“Hyderabad has come up as a challenger city,” says Anurag Mathur, the India chief executive of real estate consultancy Savills.
Commercial rentals are around 10-15 per cent cheaper than Bengaluru and “if you are hiring people at 20 per cent lower wages . . . it’s a strong, compelling case”, he adds.
At Hyderabad’s international airport, signs declare its pro-start-up credentials as the “#NextBigHub”, part of a branding and policy push that has streamlined approvals and cut red tape.
Companies from Microsoft, Google and JPMorgan have set up large offices in the city, which now hosts around one-fifth of GCCs in the country.
“We have stolen a march over everyone else,” says Jayesh Ranjan, a senior civil servant overseeing industry and investments from the office of Telangana’s chief minister.
“Every week some serious GCC activity or the other happens here, the pipeline is very, very rich.”
Many companies “buy into the myth that Bangalore is the Silicon Valley . . . but at some point in time they get disillusioned”, Ranjan adds.
“Our staff costs are low, talent is equally good and they are more disciplined, attrition is low, the government is supportive, infra is far better, social infrastructure is much more accessible, much more affordable.”
That push has seen Telangana’s annual IT exports grow three-fold since 2014 to $13.6bn, just under a third of Karnataka’s.
Funding to start-ups in Hyderabad has also increased 160 per cent between 2022 to 2024 to $571mn, though that is dwarfed by the roughly $6bn amount Bengaluru raised last year, according to consultancy Startup Genome.
So far only one unicorn has emerged from Hyderabad, compared with about 50 in Bengaluru.
In a bid to encourage fledgling companies, Telangana has set up non-profit incubation centres, such as T-Hub, a 570,000 sq ft spaceship-like building nestled in Hyderabad’s modern Hitec City district, which also houses offices for the likes of Amgen, Google and Ikea.
Since 2015, T-Hub has provided support for more than 2,000 start-ups that have raised about $2bn in funding.
“There’s a lot of ingredients and I think we are at an inflection point where we need to find the recipes from these ingredients to produce start-up heroes,” says Kavikrut, chief executive of T-Hub, who goes by one name.
Some entrepreneurs are sold.
Prabhdeep Singh, founder of ambulance service start-up RedHealth who hails from north India, was attracted to Hyderabad by the city’s established health industry, a base for homegrown companies such as Aurobindo Pharma and Bharat Biotech, as well as global majors including Novartis.
“Ten years ago it was tough to convince people to move to Hyderabad,” says Singh, who set up his business in 2016.
Now thanks to new schools, growing nightlife and entertainment options, along with comparatively less traffic and cheaper housing, “that friction is going away”.
Sanjay Nekkanti, chief executive at Dhruva Space, also moved to Hyderabad in 2015 after three years in Bengaluru, lured by lower costs and the city’s growing state and private sector aerospace and space industry.
“What you can get for 10 bucks in Hyderabad, people in Bangalore will sell you for 100 bucks,” Nekkanti says.
Yet even as the city grows in popularity, some businesses still struggle to attract the best staff.
“It becomes a little bit tricky at the senior most talent, then you have to search a little harder,” says Vikram Vuppala, founder of Hyderabad-headquartered dialysis clinic chain NephroPlus.
Prasad Vanga, chief executive at Anthill Ventures, also adds that “the ecosystem is very small from a venture standpoint”, with only about five operational funds in the city.
Hyderabad, with a smaller population than Bengaluru, is also not immune to India’s urban build-up and suffers from brutally scorching summers.
The city is often snarled in traffic, though jams are generally less severe than in Bengaluru.
“We understand that if everybody comes here it will not be feasible to have dignified living,” says Sanjay Kumar, special chief secretary in Telangana’s IT and industries departments.
The plan is that over the next five years, Hyderabad will add 20 new industrial parks, while extending its road and metro network, Kumar adds.
“The purpose is to decongest the city and create new centres where investment can flow.”
Earlier this month, Narendra Modi paid a high-profile visit to Bengaluru, his security convoy closing roads and shutting down areas of the city as he swept through and inaugurated a new metro line.
The prime minister flagged $2.6bn worth of further public transport projects.
“Today, Bengaluru is emerging as a city that has become a symbol of New India’s rise,” Modi said in a speech.
“In the 21st century, urban planning and urban infrastructure are critical needs for our cities.”
The intent is there.
Some basics can be done which will solve 40 per cent of the problems
Many of Bengaluru’s most prominent figures now hope the city is on the cusp of change thanks to plans to open a series of metro lines in the next two years.
They also remain doubtful anywhere else will, for now, supplant its central role in India’s tech industry.
“The fact is the talent here is so extraordinary and concentrated that people will come.
What’s the point of a ghost town with nice buildings?” says Nandan Nilekani, chair and co-founder of Infosys.
“It’s simply a more cosmopolitan city.”
One start-up founder dismisses moans about strained infrastructure as whingeing from Bengaluru’s legion of social media-savvy tech workers.
He says many will overlook hours-long commutes due to the city’s still glorious weather, multitude of pubs and availability of craft beer.
“Infrastructure is a challenge,” says Saurabh Govil, a two-decade Bengaluru resident and chief human resource officer at Wipro.
“The intent is there, in Bangalore some basics can be done which will solve 40 per cent of the problems.”
But some remain sceptical that the pace of growth can ever be matched by development of infrastructure.
“It will continue to outpace, there are no two ways about it unless we find someone who is as transformational as Lee Kuan Yew,” says Das from the Outer Ring Road Companies Association, referring to modern Singapore’s founding father.
“In the near future this is not something which can be solved so easily.”
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