The unsustainable boom in India’s Silicon Valley

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1:13It's July. My colleague Chris Kay is waiting for a cab, standing by some heavy traffic. He's in the Indian city Bengaluru, more commonly known by its old name, Bangalore. So this is the road just outside where I'm staying in central Bangalore. Incredibly congested, slow moving and loud.

1:42And not ideal if you're rushing to a meeting like I am. Chris makes his slow journey to Bangalore's periphery. And there he sees name after name of some of the biggest companies in the world. In a business district on the outskirts of Bangalore, about a million people work for a few hundred companies, including many Fortune 500 firms. And these include some of the top international banks from JP Morgan to Morgan Stanley to tech giants like Google and Amazon. Bangalore is known as India's Silicon Valley. And the tech sector here has exploded. It's something he and our colleague Krishan Kaushik have been observing closely.

2:26India has for more than a decade now trying to boost its manufacturing, but that has remained stagnant. So in the absence of that, India relies extremely heavily on services. And of the services, IT services or tech services are the crown jewel. Tech has propelled the growth of India's economy in recent years. But the sudden rush of investment into cities like Bangalore has also brought trade-offs. When you are inside these campuses or any of these offices, you could be fooled to believe that you are probably in New York or London or San Francisco. These are top-of-the-league facilities. They have multi-cuisine restaurants and everything.

3:01But when you dig deeper, even slightly, you realize that a lot of this is based on extremely poor city infrastructure. Krishan also visited Bangalore recently. And while he was spending time inside one large multinational bank, he says... The person who was showing us the campus said something very peculiar. Very casually, she mentioned that they don't have piped water. And what they have to rely on is a network of water tankers from which they have to buy water every day, which was extremely bizarre. So here you have really fantastic facilities inside the campuses, but the basic infrastructure doesn't exist.

3:37When you step out of these campuses, the road infrastructure is extremely poor. The metro infrastructure is barely there. The crazy traffic, the lack of piped water, the unfinished metro. These are just a few of the problems affecting Bangalore. As the city and its tech services become even more critical to India's economy, it makes these issues even more urgent to solve. If Bangalore cannot sustain this growth for the tech industry, which has become the hub of tech talent. If the investors lose faith that, you know, Bangalore can sustain to keep this industry going, they might start fleeing the country, to be honest.

4:18I'm Michaela Tindera from the Financial Times. Today on Behind the Money, can India's Silicon Valley keep up with such rapid expansion? And if it can't, what does that mean for India's economy?

4:57During his trip to Bangalore, Chris sat down with a man named Mohandas Pai. Today, Mohandas is an angel investor with a firm that funds tech-focused businesses. So Pai was born in the 1950s in Bangalore, so he really remembers it as this kind of leafy, sleepy town. I'm born in Bangalore a long time ago. I'm 67. He then went on to become one of the leading executives in India's IT industry during the boom years. So I've seen the Bangalore grow from maybe 500 ,000 people to maybe 14 million today. To be quite frank, he's incredibly outspoken and critical of where things have gone in the city as well.

5:40So he seemed to be a perfect person to speak to. What was it like as you were growing up? Well, a small town, nice town, you know, there's no traffic, no cars, a few buses, nothing much happened. And the biggest entertainment was going for a movie, three rupees per ticket for a movie. and go for long walks. It was a very nice life. Nothing happened. Mohandas' quiet life in Bangalore began to change along with the rest of India in the late 80s and early 90s. I think broadly, India essentially opened up its markets to foreign investment and trade, which beforehand it didn't. It was a very domestically driven economy.

6:22I mean, it still is, but it was really closed off and not at all friendly to overseas intervention in the economy or investment in that sort of sense. And as India slowly liberalizes its economy... You saw this proliferation of IT companies moving in and then tech startups later. They all began to flock to Bangalore in waves. And Krishan says Bangalore made sense for these companies because... Bangalore, since the late 80s, was a hub for engineering colleges. So there were all these engineering colleges producing this tech talent, and they were pretty happy living around Bangalore for the weather as well.

7:01So Bangalore is situated on a plateau. It enjoys one of the most pleasant weathers in India for a major city. The temperatures hover around early 20 degrees Celsius. So it's extremely pleasant, unlike Bombay, which can get extremely muggy and hot. Delhi, which can get extremely cold and hot. The first companies to set up shop were homegrown Indian companies operating in the IT services space. Companies like Wipro and Infosys. That's where Mohandas spent a chunk of his career. When the IT industry grew, they started hiding people. People came here. People came here from all over the country. And then, you know, the whole population started growing in double digits for 20, 25 years.

7:41These companies got their start providing what's known as back office work for other businesses around the world. That's non-client facing stuff like accounting and human resources support. The main appeal was and continues to be labor arbitrage. And what I mean by that is that India offers tech labor or labor at a much cheaper rate than what these companies would have to pay for in their home countries. And that is the main appeal even today. One outcome of Bangalore's speedy tech growth is that India's services exports have ballooned. From 2005 to 2023, they grew six times to more than$330 billion.

8:18So tech services in India are really one of India's few global success stories. It's massive. It's a huge white-collar employer. It employs about 5 million Indians across the country. And as Christian mentioned earlier, manufacturing has not taken off yet. So the IT services sector, the tech sector, is really one of the sort of breakout industries. Now, this importance for the Indian economy has only grown. That's because a newer kind of back office has gained popularity among companies like Google or JP Morgan. Over the last few years, maybe in the last 10 odd years, these tech companies and many of the major global companies that had offices in Bangalore, they realized how important AI and machine learning would be to their businesses, essentially.

9:09So what they started doing, they really started investing in turning these back offices into innovation centers. There's actual critical research happening, critical innovation happening that's in-house for many of these companies. This might sound a bit jargony, but these new kinds of so-called back offices have gotten a bit of a rebrand. They're known as Global Capability Centers, or GCCs. They're managed by the parent company, like Google. And as Christian mentioned, they're doing more than just accounting and HR tasks. So GCCs are where employees of multinational companies are based in India and are working to develop in-house technologies to help their parent companies do their businesses better.

9:52For example, Tesco from the UK, which is a massive retail chain, through the GCC in Bangalore, they're able to control and manage all the refrigerations where they keep their meats across all the outlets in Europe. They're able to check if each refrigerator is working properly and if there's a problem, how quickly they can replace that. So GCCs develop in-house technologies through which they can just help their bearing companies do their business better and more efficiently. And as the global AI race heats up, these GCCs become even more crucial, not just for the companies which have set these up in India, but also for India as they become a crucial engine for growth for the Indian economy.

10:28Bangalore is a key hub for these GCCs. During the first six months of 2025, out of all the office space bought or leased by multinational companies in India, almost half of that went to Bangalore. Now, this all might sound quite positive, but the speed at which everything's expanded in Bangalore is proving unsustainable. In his conversation with Chris, Mohandas Pai put it very simply. But the important thing about Bangalore is that our infrastructure is 15 years behind Shindu. As he says, Bangalore is behind schedule. That busy traffic, the lack of piped water in offices. The city sounds like it's at capacity and overloaded.

11:12I asked Chris and Christian, what are the risks that come with this kind of unsustainable growth? I think it's just not great if the home of one of your biggest and most successful industries is a gigantic mess and difficult to navigate. and a lot of India's rising economic clout depends on this industry and its talent. So, you know, if you can't get land to put up your office, if that office can't get water, as we've discussed earlier, it has a sort of knock-on effect. And, you know, if India can't provide the adequate infrastructure for this, then maybe other countries would be able to, you might see people upping sticks and going elsewhere or looking for the next alternative.

11:54I mean, if the government in Bangalore is unable to provide the sustainable infrastructure that's required to keep these companies going, does that really give the return on investment that these companies are making in a city like Bangalore? So will Bangalore be able to handle India's ever-expanding tech sector? Or will companies look elsewhere? The future of fixed income investing will continue to blur the lines between public and private markets. Nuveen's credit platform was built to navigate this shifting landscape, channeling capital toward the businesses, infrastructure and energy solutions that are shaping tomorrow's economy, all while aiming to deliver the resilience and returns that portfolios seek today.

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12:49Now I've just arrived in Hyderabad, landed from Bangalore and was got out of the modern, very sleek airport. I've just exited the terminal. It's definitely a bit more muggier than Bangalore for sure. And right outside as you leave, it's a big sign saying Hyderabad, home to 20 plus EV startup companies. Welcome to the hashtag next big hub. Chris touched down in Hyderabad shortly after leaving Bangalore. As problems in Bangalore worsen, it's one of many cities that see an opportunity to become India's next Silicon Valley. My destination today is the T-Hub Startup Incubation Center, which is backed by the state government of Telangana.

13:49We're expected to meet some of the startup founders who have made this city their home. Hyderabad is perhaps Bangalore's fiercest competition. It's north of Bangalore and is the capital city of the state of Telangana. I don't think you could name a single major Western company or bank that hasn't now got a GCC in Hyderabad. And that's a big change from a few years ago. You're seeing more startups setting up there, particularly in industries such as defence. And the state government is fairly proactive in trying to foster this industry, whether it's in terms of like a marketing push. They're trying to draw in investments.

14:34They're trying to really court businesses coming in. And they're essentially trying to avoid the mistakes of Bangalore as well, or at least they say they are. This startup incubator, T-Hub, is one of the state government's efforts to attract early-stage companies. It's a huge spaceship-like building that takes up nearly 600 ,000 square feet. Chris went to check it out during his trip.

15:02So how many people are here working out of here on a typical weekday? Over 2 ,000, 3 ,000 people. Yeah. I mean, there's obviously a lot of floating population. That's him and his tour guide walking through. After his tour, Chris sits down with a few of the entrepreneurs who work in Hyderabad. One of them is a man named Sanjay Nakanti. He runs a company called Druva Space, which operates in the space tech industry. When we started, we were actually based out of Bangalore. And the reason we were based out of Bangalore is, you know, if you ask where is space activity happening, people will be like, it's Bangalore.

15:39Nakanti spent three years in Bangalore before moving to Hyderabad. And I was having some early conversations with investors. And one of these investors actually brought up a data point. He said, you know, what you can get for 10 bucks in Hyderabad, people in Bangalore will sell you for 100 bucks. So that was a data point which was a little confusing to really see, and I had to test it out. And over the course of time, I did realize that, you know, the ecosystem in Hyderabad for space defense is extremely strong.

16:18Chris, tell me more about Hyderabad's other perks. What did some of the other entrepreneurs you talked with tell you about the leg up that it has over Bangalore? Look, I think arguably the biggest appeal is probably that it's cheaper than Bangalore. I think we had one real estate expert tell us roughly costs there for offices are 10 to 15 percent lower than Bangalore. Hiring is cheaper. Land is cheaper. The traffic is not as intense. the government's pretty supportive. Is Hyderabad any more immune to the issues that Bangalore is facing? So if you go there now yeah it definitely doesn't have the choke points which Bangalore does but at the same time I'm not trying to paint Hyderabad as some sort of paradise on earth it's still a sprawling jumbled South Asian city and suffers from really brutally hot summers.

17:12Its roads aren't traffic free and you know given a few more million people arguably it'd be going the same way as Bangalore. But when I did speak to the government officials there, they were keen to stress that they were building out more infrastructure, more business parks and roads to accommodate all this investment and to accommodate all these companies who are coming in. They were very aware that they didn't want to become the next Bangalore in terms of all those challenges. But who knows down the line if that's going to be enough. Christian, why do these cities have these infrastructure problems?

17:45Is it just that the influx of talent in companies has been too rapid for the governments to handle? How Indian cities have traditionally grown is, again, since liberalization especially, it's all about monetization first, and then about, okay, what can we do about the people who are living over here? That's why infrastructure that will help people live better, that comes at the last. And by the time the administrations in many of the Indian cities start thinking about that, they have lost a lot of ground. In Bangalore, water is a huge issue. It's not just piped water. It used to be a city of lakes earlier.

18:17Now many of those lakes have dried up. They're not thinking about people and how to make their lives easy. And that's the basic problem of Indian cities, that the money comes in, then the land deals start flowing. And then when the people come in, then the cities are thinking about infrastructure. That's the crux of this. So if these cities that are so important to India can't figure out how to plan for this growth, what does that mean for the country's economy? India is a rapidly urbanizing country. The majority of its population still lives in rural India, in villages. And if India can't sort out the state of its cities, that's obviously going to be a drag on the economy and productivity.

18:58And the issues that we're seeing in places like Bangalore at the moment are only going to deepen. So it's really, really crucial. To add to what Chris just said, cities, of course, will remain the main drivers of growth for the Indian economy. But if the infrastructure doesn't develop, that leaves the cities highly unlivable for a large section of the society. More people are still coming into these cities, but the infrastructure is not being developed as fast as it needs to. What that means is, can these companies who exist in these cities today, can they attract the best talent? If the city is not livable, can you bring in the best talent?

19:31And talent is the core reason that these companies are here for. So if the talent can't come, will the companies continue to be here? That's the big question. Well, if those are the stakes, I mean, what are these cities doing to try and address these issues? I think it's a mixed bag. I think there's a big question over whether a lot of this is too little, too late, particularly in, say, somewhere like Bangalore. And will these cities be able to keep up with India's rapid urbanization over the coming years and decades? And much like anything in India, it really depends on which city you're talking about and which state.

20:04It's a real patchwork country. It's really multiple different nations in a federalised system. So what is true in one place is not true in another. So we'll have to see. And as we've spoken about Hyderabad, they may come in and steal Bangalore's crown, become a much better place to invest. Some cities will rise, some cities may fall. We just don't know how that's going to play out over the next decade or two. So as Chris mentioned, of course, these problems are there. And during our reporting, we did speak to the government officials. in Bangalore, the minister in the state of Karnataka, where the city is located.

20:40We spoke to the minister for IT who mentioned that, yes, they're aware of these problems. And he basically said they are trying their best to build infrastructure now for them to catch up. But the problems, they said, are of every growing city, these problems that Bangalore is facing. They are also encouraging new companies that are coming in to go beyond the city limits, to go to the outskirts. But his argument was it's an uphill task because everybody loves Bangalore. he said, you know, people love the weather, people love the social life that comes with it. So that's the problem that they are facing.

21:10At the moment, India is in the crosshairs economically with the U.S. President Donald Trump's implemented some very steep tariffs on Indian goods. How much of a role do you see these tariffs playing in the tech sector's growth in India? So obviously, relations between India and the U.S. are at a real low right now after Trump slammed the country with this 50 % tariff on some of its exports. But the key word there is some. Services are not included in that. So there isn't a direct link to that impacting the IT industry in places like Bangalore. But at the same time, we've recently seen the US high-cap H1B visa forms to$100 ,000, that directly impacts India's IT sector much more.

22:01About 70 % of those visas are Indian nationals, many of them working for the industry out of India in the US. So that will have definitely a deeper impact. Yeah, you're talking about Indian tech companies like Infosys that have offices in the US and also have Indian citizens working there on visas. Yeah, and it's really going to be a slow burn effect because this isn't going to play out until next year when the next visa lottery comes out. So it's definitely still sort of wait and see and how this impacts us and how this impacts these cities as well. whether we'll see more Indians decide they're going to rule out going to the US because they can't make a long-term career there, whether there's going to be more drives from US businesses to decide, OK, we can't get the talent we need into the US.

22:53So why don't we double down on these GCC offices, these offices we've set up in these big cities, and whether that will have implications on the strained infrastructure that we've already talked about. Again, we're going to have to wait and see what happens there.

23:12Behind the Money is hosted by me, Michela Tendera. This episode was produced by me and Safia Ahmed. Fact-checking by Simon Greaves. Sound design and mixing by Alexander Higgins and Sam Giovinco. Original music is by Hannes Brown. Topher Forges is the FT's acting co-head of audio. Thanks for listening. See you next week.

24:05like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible.