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Why hasn’t India been able to produce its own Silicon Valley?

Patriotism, cohesion and rhetoric described the scene as the Indian Prime Minister, Narendra Modi addressed the 18,000 strong audience in the iconic Madison Square Garden on September the 28th, 2014. India came of age  in the United States with an epic show of political, social and economic clout. Deafening chants of “India, India,India” and “Modi, Modi Modi” rang throughout the arena further intensifying the already electrifying atmosphere.

In his nearly one-hour long speech, Modi primarily focused on the power of the Indian diaspora in shaping a positive perception of India worldwide. He joked that earlier India was regarded as a country of snake-charmers, and now Indians were spinning the world with their fingers using the (computer) mouse. It is true: India’s IT industry has achieved indisputable success, with Indian companies like Infosys and Tata Consultancy Services (TCS) being one of the largest technology service companies in the world. The CEOs of two of the largest companies on earth: Google and Microsoft are of Indian origin. Despite this incredible talent, why are we unable to make a Google in Bangalore? Or a Microsoft in Hyderabad? Why hasn’t India been able to replicate, even in some small measure, Silicon Valley’s top-end technology ecosystem? To find a definitive answer, we have to dig deep into modern Indian history.

India’s technology companies were born in the era of the Socialist India (1970s-1980s) which was marred with bureaucratic Red Tape, archaic labor laws and lack of power and electricity. These companies were forced to focus more on low-end software, rather than high-end hardware. Given India’s nationalised banking system, financing start-ups was almost non-existent. Thus started the trend of talented Indian engineers immigrating to tech-friendly Western countries like the United States and participating in startups there, which is casually referenced to as the “Brain Drain”

By contrast, the tech services sector in India was almost non-regulated. The Indian pool of engineers was huge, cheap, and English speaking. This led to a blooming Indian tech services sector which is popularly known as the “Bangalore Boom”. Unfortunately, this growth was over-hyped: This obscured the fact that India hadn’t truly created a start-up ecosystem.

Now creating a start-up ecosystem is a huge and a challenging task, which needs sincere patience and dedication from both the Government and the citizens. Silicon Valley, for instance, benefits greatly from world-class, top-notch academic research institutes in its neighbourhood. From the California Institute of Technology to the University of California, Berkeley, they have them all in their backyard. Despite 14 new Indian Institutes of Technology have been set up in India since the 1990s, ironically there is not a single IIT in Bangalore: the so-called startup capital of India.

Meanwhile India spends only 0.8 percent of its GDP on research and development, compared to 3 percent in the U.S. and 2 percent in China, both of which have higher GDPs than India. The Intellectual property protection system is too weak in India to support a start-up environment. All  these issues have hindered the often-touted “Indian Growth Engine”.

The present government through its international outreach intends to showcase India’s hidden talent and its start-up culture to the world. It wants global technology giants to invest in India. If the government actually wants an Apple or an Amazon to be produced in Bangalore, it needs to shore-up and promote research and innovation, strengthen intellectual property rights across the board, establish world-class academic institutions and above all foster a positive and a competitive environment in India.

We have a long way to go to achieve the Indian Dream.

Author – Rajvir Batra



15 Replies to “Why hasn’t India been able to produce its own Silicon Valley?

  1. The technology sector in our country is deeply entrenched with bureaucratic nonsense. The policies created by the current government are quite centralized towards backward classes and minorities. It is failing to understand that transforming better into best is the need of the hour. The Indian Silicon valley is abundant with potential world changers but the initiative for a better technological sector must come from the government. Moreover, it is axiomatic that today, India cannot compete with nations such as the US and China, in terms of tactful economy and regulation of the population in the technology sector but, the threshold to success passes through the shadows of failure. Therefore, government should take various risks for the regulation of the population and encourage the small scale entrepreneurs to emerge as the capable policy changers.

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