The IT industry has grown spectacularly in the past decade -- at least the export segment. The industry is at that critical inflection point where its multiplicative impact will start becoming visible and tangible. Going by current trends, IT will have the same impact in the next three to four years as it has had in the past 20 years.

A couple of months back, the securities firm CLSA came out with a detailed analysis of the Indian IT industry. The analysis revealed:

• 20-25 per cent of India's GDP expansion over the next three to four years will come from IT;
• India's IT exports will cross the country's oil imports from 2007-08 onwards assuming that oil prices are at around $65 a barrel;
• The IT industry -- directly and indirectly -- will pick up a third of the addition to the urban labour force over the next three to four years.

What's bothersome is the slow geographical spread of IT. Let us take IT exports as a whole, which in 2006-07 were around $32 billion or around Rs 144, 214 crore (Rs 1,442.14 billion). This is how it was spread across locations of the software technology parks.

Seven cities accounted for a whopping 95 per cent -- Bangalore (33 per cent), the National Capital Region (15 per cent), Chennai (14 per cent), Hyderabad (13 per cent), Pune (10 per cent), Navi Mumbai (8 per cent) and Kolkata (2 per cent).

• Seven cities together account for yet another 3 per cent -- in descending order of contribution these are Mysore, Bhubaneswar, Mangalore/Manipal, Gandhinagar, Thiruvananthapuram, Mohali and Jaipur.
• Four cities together account for yet another 0.6 per cent: Indore, Vishakapatnam, Kochi and Coimbatore in descending order of contribution.

There are valid reasons for this geographic distribution. The IITs of Kanpur and Kharagpur are almost non-existent on the IT map of India, proving that the IITs have had great global impact but their local impacts have not been commensurate with the hype that has come to surround them. Furthermore, SEZs appear to be increasing the digital divide. I have always felt that the true value of SEZs must be judged by the extent to which they help promote labour-intensive manufacturing. But so far, of the 142 SEZs notified, 86 are for IT and ITES alone. And of these 86, the usual suspects are most prominent -- 26 are in Andhra Pradesh, 14 in Tamil Nadu, 13 in Karnataka and 10 in Maharashtra, making a total of 80 per cent in these four states alone.

The need now is to think of the under-served regions and areas. Sure, infrastructure and connectivity will have to improve but some entrepreneurial endeavour will not be out of place. TCS [Get Quote] is working to develop Guwahati as an IT location using the IIT there as a focal point. Nasscom needs to engage with state governments that are now not on the IT radar screen and work with them to develop promising locations.

How long can the IT industry be in the "To HiB or not to be HiB" mindset? Seventy-five per cent of our software industry is exports, unlike China, where the domestic market consumes 75 per cent of the business. We have had the computerisation of land records in a couple of states like Karnataka and, of course, the computerisation of railway reservations, which has had tremendous social value as well. We need to take up a couple of national initiatives in a PPP mode where IT can bring about a transformation.

In addition to the initiatives taken by different state governments, the Central government has recently launched a very major e-governance programme. Twenty-seven mission-mode projects have been taken up in addition to the establishment of infrastructure. Of these nine are in the Central government and cover income tax, passport and immigration, company affairs, insurance, citizen data base, excise, pensions, banking and public grievances. Eleven projects are with state governments and cover areas like land records, road transport, property registration, treasuries, panchayats and municipalities, commercial taxes, police and employment exchanges. Seven projects are in the integrated services category and cover areas like EDI for international trade, e-procurement, e-commerce, e-businesses and common service centres. By December 2008, the state-wide area network project at a cost of over Rs 3,000 crore (Rs 30 billion) is expected to be in place with a minimum 2 Mbps connectivity till block level and around 7,000 points of presence all over the country.

Competitiveness, we have been led to believe, emanates from technology development. This is true to an extent. My own view has always been that it is technology application that in the long run leads to productivity gains. We have not paid adequate attention to this aspect of technology strategy and all that it entails. Technology is always embedded in a social context and unless we focus on the core, unless we always keep in mind the adage -- technology is the answer but what was the question -- we are liable to be disillusioned soon.

My fourth and final point relates to the use of IT as an instrument of the country's strategic and economic diplomacy, something in which I have got involved of late. It is well-known that the development of our IT capability has had a profound impact on Indo-US relations. As the author of Chindia I have absolutely no doubt that Chinese attitudes towards us underwent a fundamental shift when our IT export industry emerged in the USA in such a stunning manner. 

It was the late Dewang Mehta who did so much to build the Nasscom brand who once said that India was doing very well in IT and beauty because government was far away from both. He was not entirely right about the former. The government has indeed played a key role in creating infrastructure and I am of the firm opinion that cities like Bangalore and Hyderabad could not have achieved their current status without the crucial investments made in public S&T there from the late 1950s onwards. Public investments can still play a catalytic role, even in these days of PPP.In IT, there is great scope for true PPP as for example in the area of education and training. I do hope that while exulting in its global success, every once in a while Nasscom reminds itself of its local roots and its domestic imperatives.

The author is Union minister of state for commerce. This piece has been excerpted from his address to the Nasscom executive board on September 19