Libmonster ID: BY-2331

D. O. SHCHELKUNOV

Master's degree student at MGIMO (U) of the Ministry of Foreign Affairs of the Russian Federation

India, Bangalore Keywords:Skolkovoinformation technologyoutsourcing-innovative economy

The project called "Skolkovo Innovation Center" is conceived as a Russian analog of California's Silicon Valley. Innograd (innovation city) in the near Moscow region should prove to the whole world that Russia is able not only to trade in oil and gas, but also is able to remember its past achievements and continue developing in fundamental science, in particular, in the field of space, nuclear energy, information technology and medicine.

Naturally, the future will show what will come out of this and whether this project will serve to qualitatively change the structure of the Russian economy. Since December 2010, when the construction of the innovation center was launched, too little time has passed so far to be able to judge any first serious results of such a large-scale project as Skolkovo.

After all, the same Silicon Valley in the United States has been developing for almost seven decades, and the history of the formation of the Indian "Silicon Plateau" - the city of Bangalore in Karnataka-dates back to the 70s of the last century.

And while the American experience of creating an innovation cluster has long been closely studied by various experts in our country, the experience of India seems undeservedly overlooked, although it is also of no small importance for Russia. After all, the Indian reality is in many ways closer to the Russian one than the American one.

How did the "Bangalore miracle"originate and develop? How did the breakthrough in the information technology (IT) industry allow the South Asian giant to enter the global pool of high-tech powers?

HOW THE STEEL WAS TEMPERED

If you remember the history, then the British rule had a great influence on the development of the city, during which the telegraph, post office, railway was laid here, and the first police department was created.

Bangalore's most significant rise began in the early twentieth century, when electricity was installed here for the first time in India in 1906. Further growth and prosperity of the city are associated with the development of industry and the creation of new jobs, which caused a large influx of population, making Bangalore the third largest city in India by the beginning of the XXI century.1

The first attempts to transform a fairly modern Indian city by the standards of that time into one of the global centers of technology and innovation were made in the early 70s of the last century.

Such attempts were met with great skepticism by most experts. To understand this feeling, it is enough to recall India forty years ago. The country was characterized by a high level of corruption, an extremely low standard of living for the absolute majority of the population, the economy was under strict state control, foreign capital investment was severely restricted, and there were a significant number of protective customs duties, which, as expected, were imposed by the state.-

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It was supposed to encourage domestic high-tech production.

However, the Karnataka State Government decided to support the idea, and in 1976 the Karnataka State Electronics Development Corporation Limited (KEONICS) was established. In 1978, she established Electronics City in the vicinity of Bangalore in two villages with a total area of 1.34 square kilometers.

Everything was not easy: tenants constantly complained about the poor condition of roads, power and water supply.

The liberalization of the Indian economy, which was launched in the early 1990s by Indian Prime Minister Narasimha Rao and Finance Minister Manmohan Singh, the current head of government, has significantly improved the situation. It is no exaggeration to say that 20 years ago the city experienced a real technological revolution, when the city began to meet the growing need of the global economy for software.

As part of the marketing concept of KEONICS, the territory of Electronics City was given the nickname "Silicon Valley of India". For advertising purposes, an article entitled " Can Bangalore become India's Silicon Valley?"2. It included references to a 1987 study by the United States Agency for International Development that favourably assessed Bangalore's chances of becoming a high-tech hub.

However, having no significant funds for the development of their own high-tech industries and access to venture financing, Indian businessmen have occupied the niche of servicing the business processes and production of large multinational companies( TNCs), which has turned Electronics City into the outsourcing capital of the world.

According to KEONICS, Electronics City is now home to the headquarters of more than 100 information technology and electronic TNCs. Bangalore is also home to a number of India's world-renowned colleges and research institutions, as well as software, aerospace and telecommunications companies.

And in recent years, some foreign media outlets have even begun to wonder: "Is there a new Silicon Valley emerging in Bangalore?"3.

Today, the capital of the world's offshore programming ranks second in terms of the number of literate population (83%) among Indian major cities, second only to Mumbai. At the same time, approximately 10% of the population in Bangalore lives in slums (there is no electricity, sewerage, etc.), but this is a relatively low figure compared to other cities in India, such as Mumbai and Delhi, where this figure reaches almost 50%.

In 2009, Bangalore was included in the list of "global cities", i.e. cities that have become an important element of the system of international political and economic relations, for example, Washington, Beijing, London, Moscow, Berlin, Paris, Tokyo, etc. It was classified as a second-tier world center - "beta city" - along with the following


* Outsourcing (outsourcing - use of an external source/resource) - transfer for a long time of certain business processes or production functions to service another company specializing in the relevant field (editor's note).

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megacities like Boston, Dallas, Miami, Munich, Kuwait City and Lima 4.

WHY IS A"MIRACLE" POSSIBLE?

From the brief history of Bangalore, it becomes clear that no "miracle" would have happened without the direct participation of the state in the development of the innovation center. In fact, state support is a global axiom in the formula for creating "silicon valleys" in almost any country in the world - Israel, France, China, etc.

The United States stands apart for historical, political, and economic reasons. There, in the early 1950s, Stanford University initiated the creation of the future Silicon Valley-the Stanford Industrial Park. But he was not prevented by large orders from the Pentagon and NASA.

Naturally, the "Indian miracle" occurred not only due to a consistent state policy, but also due to a number of factors that can be attributed to the special competitive advantages of the country as a whole. This includes the presence in India of a large number of educated technical specialists with knowledge of English, and historically established business ties with Western powers, especially with Great Britain, and numerous foreign diasporas of Indians who maintain close contact with their homeland.

The competitive advantages of different countries differ. And in Russia, they are not at all the same as in India, and in India they are not the same as, for example, in France.

One thing remains unchanged-it is comprehensive state support "from above" for innovative industries. Without such support, in this case information technologies, it is impossible to create the necessary conditions, in particular infrastructure, for the development of these areas "from below" - by entrepreneurs and private companies. Moreover, it requires daily hard work, a routine that does not earn quick money or PR.

First, since 1976, the Government of India has actively participated in the creation of export-production zones with preferential tax regimes on its territory, and then it also began to establish the first technology parks by concentrating qualified specialists in one place and providing them with modern production infrastructure (Bangalore, Chennai, Hyderabad)5. At the moment, about 70 state and private technology parks are successfully operating in the country.

The largest Indian universities that train technical specialists began to receive state subsidies. And the period from the late 1970s to the early 1990s witnessed the emergence of the first Indian IT giants, which are now ranked among the world's 100 largest information technology companies: Infosys Technologies Ltd, Wipro Technologies, Satyam Computer Services Ltd, etc. 6

Secondly, the Indian Government has paid great attention to developing a legal framework for the needs of the rapidly developing industry. Some of the main legislative acts regulating the activities of local companies and their interaction with foreign counterparties are the Information Technology Act (2000), which defines the rules of electronic commerce and crimes in the IT sphere 7, and the Freedom of Information Act (2005), which is designed to protect information related to strategic and economic interests foreign companies or states 8. The latter is of particular importance for cooperation between Indian companies and their overseas partners, because the problem of copyright infringement and theft of confidential data is one of the most acute in the field of information technology outsourcing.

Third, the tax and investment climate created by the Indian authorities has also had a huge positive impact on the development of the Indian IT sector. So, since 1999, all companies in India that produce software for export have enjoyed a preferential tax regime, thanks to which they retain 90% of their profits. And the field of information technology is one of the few in the country where 100% foreign participation is allowed, which the multinational corporations Microsoft, Google, Oracle, Yahoo and others, who opened their branches in Indian megacities, did not fail to take advantage of.

WHAT IS THE RESULT?

In 1998, India set itself the goal of becoming one of the world leaders in the field of information technology.

And just over a decade later, in the 2009/10 financial year, Indian companies earned a total of more than $73 billion from exporting information services. (2nd place in the world after the USA)9. For comparison: the volume of

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The total Russian Internet economy in 2009 was $19.3 billion 10.

Today, India ranks second in the world in terms of the number of specialists employed in the IT sector - more than 1 million people and exports software products to more than 180 countries around the world.

However, success in the field of information technology brings significant dividends to the country in other areas of the economy. After all, in the modern world, virtually no industry and no type of business can succeed without the introduction and active use of computer technology, software "soft" and automation systems.

The scientific, technological and human resources potential that India was able to accumulate through outsourcing allowed the country to break ahead not only in the field of offshore programming, but also contributed to the growth of the space industry, energy, biomedicine, and pharmaceuticals.

Thus, thanks to its focus on IT technology, India has managed to transform itself over the past 30 years from a call center* and back office* of leading Western corporations to one of the world's major high-tech powers.

LITMUS TEST OF RUSSIA

In September 2011, representatives of the Skolkovo Foundation and the French company AREP presented the general plan of the Skolkovo science city to the general public in Moscow.

According to the designers ' idea, a technological university will first be built on the territory of Innograd, then a technopark with hotels, offices, business centers, as well as residential quarters. The science city will be able to accommodate about 30 thousand people-permanent residents, as well as about 10 thousand people coming to work from Moscow. The main transport artery of the city of Skolkovo will be the boulevard. According to the designers ' plans, only public transport with electric motors will use it. Cars with petrol engines will not be allowed to enter Skolkovo . Architects place a special emphasis on intercept parking, rail transport and metro 11.

But all this is still only in the plans.

On the other hand, companies that have the status of a resident of the Skolkovo Innovation Center, which is issued to a Russian legal entity only if it is engaged in a single activity - research-are already completely exempt from paying income and value-added taxes. Residents of Naukograd also have the right to pay contributions to the Pension Fund in the amount of 14% of the salary fund, while other Russian companies pay 26%12.

In addition, the land tax and corporate property tax will be abolished for Skolkovo companies, and they will not need to obtain a permit from the migration service to attract foreign labor. Naturally, these foreign workers mean highly qualified scientific specialists, and not unskilled workers.

Of course, attempts to create hothouse conditions for innovative companies in the harsh reality of the Russian economy are not meaningless and, apparently, the Skolkovo experiment in the future may become a model for the whole country. However, it is not superfluous to repeat the thesis that the key to the success of this ambitious project is primarily the painstaking routine work of the Russian authorities, the result of which should not be expected in the near future.

The Skolkovo project is destined to serve as a litmus test that will show whether a genuine revival of Russian science and the formation of an innovative economy will really begin in our country, or whether it will suffer the fate of Soviet "long-term construction projects".


Call center - a centralized office used for receiving and transmitting large amounts of information received in the form of telephone requests (editor's note).

** Back office - an operational and accounting division that provides documentation and transaction support (editor's note).

1 Office of the Registrar General & Census Commissioner, India - http://www.censusindia.gov.in/

2 Can Bangalore Become India's Silicon Valley // Plus: The Total Computer Magazine. 1987.

Saritha Rai. 3 Is the Next Silicon Valley Taking Root in Bangalore? // The New York Times, 20.03.2006.

4 Globalization and World Cities Research Network. Loughborough University, England -http://www.diserio.com/gawc-world-cities.html

Asma Lateef. 5 Linking up with the Global Economy: A Case Study of the Bangalore Software Industry // International Institute for Labour Students. ILO - http://ilomirror.library.Cornell.edu/public/english/bureau/inst/papers/1997/dp96/index.htm

Popsulin S. 6 Five Russian companies entered the world ranking of IT outsourcers, 09.08.2010 // CNews.Ru - www.cnews.ru/news/top/index.shtml?2010/08/09/ 404343

7 IT Act 2000 - http://legalserviceindia.com/cyber/itact.html

8 Right to Information Act 2005 -http://righttoinformation.gov.in/webactrti.htm

9 Data from NASSCOM (National Association for Software Development and Service Delivery) http://www.nasscom.in/Nasscom/templates/NormalPage.aspx?id-58662

Fedina O. 10 The share of the Internet economy in Russia's GDP may reach 5% by 2015, 19.05.2011 / / RIA Novosti -http://www.digit.ru/business/20110519/382096957.html

Ivanova T. 11 The general plan of Skolkovo construction is published / / RBC Daily, 12.09.11 - http://www.rbcdaily.ru/2011/09/12/media/562949981456140

Milchakova N., Ivina T. 12 Tax aspects of activity in Skolkovo // Исследование PwC (PriceWater Co.) http://aebrus.ru/application/views/aebrus/files/events_files/PwC_Milchakova_file_2011_03_1 5_17_22_01.pdf


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