Chennai today ranks amongst the top five most productive metro areas of the country with an estimated GDP of around $60 billion at purchasing power parity.
It has a broad industrial base in the automobile, information technology (IT) and IT enabled services (ITES), electronic hardware, financial services and healthcare sectors. It is also rated amongst the top ten fastest growing cities in the world and hosts a large number of Fortune 500 companies. In the IT-ITES sector, Chennai occupies a pride of place in the country, perhaps next only to Bangalore.
How has the city developed its IT industry in the last two decades? Can the industry develop further in the city to make it the next Silicon Valley?
The roots of the IT industry in the city can be traced to the late 1980s, when a few software firms were founded locally to cater to the software operations and maintenance needs of the local manufacturing firms. The growth of the industry remained limited till the mid1990s, when there was only 34 software exporting firms in the city.
However, during this period, two multinational companies (MNCs) started operations here sowing the seeds for the city to become a major centre for MNCs in the years to come.
The state policies during this period for attracting large industries played a prominent role in the development of the industry. The central government also established a Software Technology Park in the city under the STPI scheme in 1995. A major policy initiative of the state for the IT sector came in 1997 with the promulgation of the state’s first IT Policy that focused on the creation of IT Parks in the city. During this period, the state focused on creating the physical infrastructure and improving the availability of skilled personnel through technical education. Subsequently, there was a greater focus on attracting the large multinational and national companies to the city.
The state announced its second IT policy in 2002 which focused on the small and medium enterprises (SMEs), promotion of the state as the destination of choice, e-governance and taking IT to the rural areas. Availability of land and developed infrastructure in the city and the surrounding areas were critical drivers to the growth of the industry.
Development of the IT Corridor along the Old Mahabalipuram Road (OMR) provided a major boost to the IT industry in the city. Mahindra World City, a Special Economic Zone (SEZ) near Chennai has also provided a major boost to the development of the IT industry. Elcot has also played a prominent role in supporting the development of the IT industry in the city and the entire state by developing IT parks and offering land to the IT firms.
The state announced the third ICT Policy in 2008 which provided a further boost to the growth of the industry. Today the city is home to a large number of multinational and national firms in this sector, such as Accenture, Cognizant, Capgemini, Oracle, HCL, HP, IBM, Infosys, Microsoft, Oracle, TCS, Tech Mahindra and Wipro.
The Chennai metro area is also home to a large cluster of electronic hardware manufacturing firms, particularly in the Sriperumbudur electronics SEZ with the presence of major multinational corporations like Dell, Cisco, Samsung, Siemens, Sony-Ericsson and Flextronics. It is estimated that this sector alone has attracted investments worth about US$3.5 billion in the city.
With the easy availability of high-quality infrastructure and skilled personnel, the city has the potential to develop further into a global hub for the IT-ITES industry and become the next Silicon Valley.
(The writer is a senior IAS officer in Tamil Nadu and is currently the CMD of Elcot. The views are personal.)
