Why do business in ... Bangalore

In torrid India, Bangalore has long been renowned for its agreeable climate, a result of its elevation above sea level. With good reason, it is sometimes referred to as India's 'Garden City'. Today, Bangalore is best known as India's biggest IT hub and the number of technology firms that have made it home have earned it a new sobriquet, 'Silicon Ghat'.

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Last Updated: 31 Aug 2010

Why you should Bangalore is one of India's major economic hubs, with significant manufacturing and biotech sectors, and is one of the fastest-growing cities in a fast-developing economy. It has the subcontinent's highest per-capita income, its second-highest literacy rate, and a thriving education sector that produces thousands of skilled workers, most of whom speak English.

Top Indian 'business process outsourcing' firms like Wipro and Infosys (whose glass pyramid - above - is one of Bangalore's best-known landmarks) maintain profit margins of some 23%, compared to 6% for their western competitors. Their success has helped to make the city the destination of choice for dozens of multinationals looking to set up on the sub-continent. Last year, Cisco chose Bangalore as the site for its 'Globalisation Centre East' - its second global HQ after Silicon Valley - and has plans to move 20% of its top global executives there.

Compared to the UK, Bangalore is still very cheap in terms of office space and salaries - the salary earned by one British-based software developer would pay for seven equally skilful Bangalorean techies, while the desire to maintain its position as the jewel in India's IT crown ensures a benign tax and incentives regime. According to consultants AT Kearney, India still has a big lead over its rival China as an offshoring location. Much of this is down to language skills and the maturity of the industry there.

The city's new international airport opens in April, and a badly needed new ring road and motorway connections are also on the way. It is also well connected to the country's slow but vast and reliable rail network. In terms of liveability, Bangalore has always been one of India's more cosmopolitan and liberal cities - well known for its nightlife, and fairly close to attractions like southern India's stunning beaches and the hill stations of the beautiful Western Ghats range.

Why you shouldn't Many of Bangalore's problems are those that bedevil India as a whole. For all its much-trumpeted position as the 'world's back office', the World Bank still ranks India as 120th out of 178 in terms of ease of doing business; by comparison, the UK is 6 and even Nigeria is only 108. Similarly, on Transparency International's Corruption Perceptions Index, India comes a lowly 72, below Colombia at 68 (the UK is 12). Then there is the legendary Indian bureaucracy.

Like India itself, Bangalore is a divided city, with a huge wealth gap between the corporate upper and middle classes and everyone else. It has between 400 and 1,000 slums, home to around 25% of its 6.5 million population; overall, about 40% are considered poor.

The city's other great drawback is that its infrastructure - notably roads and power - has failed to keep pace with its population growth and commercial aspirations. Traffic is appalling and the proposed metro system, due for completion in 2011, has been subject to numerous delays. Meanwhile, air pollution and unplanned urban sprawl are putting serious dents in the city's image as a cool and leafy retreat. Bangaloreans fear that the failure to tackle the city's problems is driving foreign firms to rival Indian cities such as Hyderabad and Pune.

In conclusion Even by the standards of developing countries, Bangalore is a bargain. According to Mercer, it is the 134th most expensive city in the world (London is the second) and one of the cheapest in Asia.

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