Creating the Conditions for ITES in AP

In a special report on Andhra Pradesh in the Financial Express in May 2003 called Towards Swarnandhra Pradesh the focus of one article is on Hyderabad becoming India’s ITES capital :

With the telecom bandwidth in excess of deand, the focus would be towards creating high quality office space with amenities like high-speed telecommunication links, uninterrupted power supply etc which are critical to attract the ITES companies.

Towards this, the State government is holding talks with leading real estate developers including Rahejas of Mumbai, DLF of Delhi apart from Larsen and Tubro Infocity for high-quality office spaces in and around Hyderabad.

So what AP is trying to do is to create the environment so that businesses — ITES — would locate themselves there because of the lower cost of doing business. In a sense, it is a no-brainer: if you have the proper environment, business will develop. However, this environment will not emerge automatically on its own. That is, the market will not supply it spontaneously. Why the market fails to do this? It requires collective action. Or in other words, it is a coordination problem.

RISC is motivated by similar concerns in the rural arena. For doing business in rural India, you need to have adequate infrastructure. Given the immense investment needs, every village cannot be transformed. So a core-peripheri approach is required. Further, RISC also stresses the same coordination failure in the provisioning of infrastructure in rural India.

Mark Twain had once remarked that there are fundamentally only three archetypical jokes. (I forget what those archetypes are, but one of them was the ‘mother-in-law’ joke.) So also, there are a small set of basic problems. These show up repeatedly in various theaters in different guises. Once you recognize them, the solution is pretty much the same. Why people don’t get this is a question that I have not fully been able to fathom.

Author: Atanu Dey

Economist.