Can India have its own Silicon Valley?

Can India have its own Silicon Valley?

Recently, two of the most well known IT majors in the US have appointed CEOs of Indian origin namely Microsoft and Google. But apart from Satya Nadella and Sundar Pichai, others from India are also doing well in Silicon Valley. It is estimated that while Indians comprise only 6% of Silicon Valley’s population, they lead 15% of its startups (Wadhwa, 2015). The question remains whether India has the potential to create a Silicon Valley of its own. Replicating the top end tech ecosystem should be easy for the country, given its prowess in IT. If China is the global factor, India leads in back office operations and outsourcing. What will it take for India to have its own Silicon Valley? Will it be possible? Let us explore.

Yes

1. Proven prowess in IT: India has amazing prowess in the field of information technology and major tech companies here include Wipro, Infosys, TCS, Cognizant and Tech Mahindra. With increasing expertise in the IT sector, India has the potential for developing its own Silicon Valley.

2. Economic environment in the country is improving: Ease of doing business in India has increased. India has improved its rank on the ease of doing business index and it now takes 29 days as opposed to months to start a tech company in India.

3. India has a talented pool of engineers - Top engineering colleges in India such as IIT and management institutes like IIM produce the creme de la creme of talent in the IT sector. Rather than going abroad, many Indians are preferring to work in the nation and for the nation.

4. India’s demographic dividend is a big plus - India’s young working population is steadily increasing and if utilised properly, can become a workforce to power the tech industry. Given the vast pool of talented workers and their immense potential, creating a Silicon Valley in India is not difficult.

5. Rise of new e-commerce players: India’s Tomato founded in 2008 has received over USD 200 million in funding and has presence in close to 20 nations. Indian players like Flipkart and Snapdeal have also attracted massive funding. A true tech pioneer startup is set to emerge from India in this field.

6. Development of world class R&D infrastructure - New agreements in the field of information technology research and development have prompted the rise of a possibility that India could soon be home to a Silicon Valley.

7. Emergence of new VC and PE investors - These investors will create capital for nurturing business in the Silicon Valley for a new start.

8. Culture of innovation and research - Currently, the education system has become oriented towards promoting application of research principles and a culture of innovation. This could spur the development of a Silicon Valley in India.

9. Government support - Infrastructure has been provided along with easy financing options for seed funding and financial support.

10. Programmes that support Silicon Valley like development - This includes Make in India, Skill India and Digital India

11. Better salaries in IT sector - With growing demand for an internationally skilled workforce in Indian IT companies, salaries are rising to attract talent pools from outside the country as well as preventing brain drain. This could pave the way for another Silicon Valley in India

No

1. Tough Climate for Doing Business: While Indian tech companies have been faced with a tough climate for doing business as a result of which they have focused on provision of low value added IT services to overseas clients rather than high value added products for the domestic industry, this has created a hurdle in the potential for a Silicon Valley in India

2. Low Financing Options for Startups: India’s nationalised banking system and red tape in the sector has strangled the growth environment for risky startups, a key element of the US based Silicon Valley

3. Lack of regulation: The Tech sector has not been regulated well and engineering here are low cost though the talent pool is large. Indian IT companies like TCS and Wipro never developed the risk appetite to diversify into higher end services and product development

4. Lack of world class universities: Indian universities have poor ranking worldwide. Academic research is rarely applied in the real world and Silicon Valley in the US is boosted by several US universities which power research and development here. Despite 14 new IITs since the 1990s, not one is located in the tech capital of India, Bengaluru. India spends only 0.8% of GDP on R&D. This is in contrast to 2.8% in US and 1.8% in China

5. Indian IT sector has perceived inadequate protection of IRP rights: IPR regime in India is virtually unregulated. Recently the US Chamber of Commerce has ranked India as 29th in 30 countries in 2015 for protection of IPR rights.

6. Cumbersome labour laws- The labour laws in India are really complicated creating risk and making it tougher for a startup to flourish in India.

7. Brain drain: India has attracted talent from all over the world, yet is unable to retain it. Moreover, Indians seek opportunities abroad rather than opting for domestic companies.

8. Lack of innovation and funding - Lack of capital is a massive issue and this has led to low growth of manufacturing or product based IT companies. Poor quality of education and lack of skill development as well as mentality of job orientation rather than entrepreneurism is creating a major obstacle for developing a Silicon Valley in India

9. Less appetite for risk - Indian companies have low capacity to absorb risk as a result of which they do not diversify. This poses a problem for the development of a Silicon Valley in India.

Conclusion

For Micromax to become another Google or Amazon, more is needed. Government schemes may promote financial inclusion, but they do not offer VCs for the tech industry. Moreover, lack of labour and companies law and uncertainties in legislations also hinder the possibility of another Silicon Valley located in India. Complex taxation and IPR regime along with low expenditure on quality education and R&D in India have complicated the matter further. A Silicon Valley can only develop in India if changes are brought about in resource development, policy formation, infrastructure creation and ease of doing business. An entrepreneurial spirit also has to be fostered among Indians. With these changes, an Indian Silicon Valley is more of a possibility, whereby India will reap the true benefits of its demographic dividend.