India’s tech hub can’t feal with SVB if it’s stuck in traffic

India’s software powerhouseearned itsspurs by managing tech for global multinationals. Now it’s even shieldinglocal startupsfrom the falling debris in US banking. The city of13millionpeople punches above its weightfor India and the world.

But while success in solving technical problems has broughtprosperity tocoders, inadequate infrastructure, particularly transport, is detracting from thequality of life of professionals who call the fast-growing Indian metropolishome.

View Full Image

Once known as India’s garden city, Bengaluru is choking on toxic fumes from cars, buses, two-wheelers and auto-rickshaws stuck in bumper-to-bumper traffic. After London, the city isthe second-slowest in the worldto drive in, according to a TomTom report. But while the UK’s capital boasts of a massive and well-usedunderground rapid transitnetwork, Bengaluru’s subway project, which got under way after decades of delay,has sufferedfrom12 years of stunted growthunder various stategovernments.

When it comes to the information superhighway, there are no speed limits in the Indian city.Razorpay, a new-age payment gateway, is the fifth-largest economy’s answertoStripe. It helps businesses receive money online from customers.Last month, the Bengaluru-based firm started getting an unusual query from itsstartup clients: Can it move their funds in Silicon Valley Bank, or SVB, to dollar accounts in Gift City, the offshore financial center India is promoting in Prime Minister Narendra Modi’s home state of Gujarat?

Indian startups, many of whichare funded by US investors,began to worryabout thesafety of their depositswhen SVBannounced a desperate fund-raising plan on March 8, triggering a rout in its shares. The bankshut down on March 10, a Friday. That gave intermediaries a rather narrowwindow of timeto find a new home for clients’ cash.“We facilitated$50 million, and roughly the same amount is in the pipeline,” RazorpayChief Executive Harshil Mathurtold me. “We weren’t the only player. Overall, I estimate transfers of $200million to $300 million.” For customerswho failed to act in time, the nine-year-old fintechset up $250,000 credit lines, helping them stay afloat when they openedfor business on Monday.

The residents of Bengaluru are also using tech to overcome the onerousburden placed on them by creakyinfrastructure, but they’re far less successful in the physical world where they livethan in the digital universe where they make a living.Sharingyour live location on WhatsApp with the person you’re going to meet is just a fancy excuse for arriving late because of snarled-up traffic. During busy parts of the day, it takes an hourto cover a distance of 20 kilometers (12 miles). And this is when the roads are dry. Last year’s rainy season saw tech-industry workers hitching rides on tractors.

With elections around the corner,filling the infrastructuregaps has acquired awelcome urgency. Modi’s party will makean all-out attempt to hold on to power in next month’s pollsin Karnataka, the southern Indian state of which Bengaluru is the capital. By all reckoning,it will be a tough contestagainst Rahul Gandhi’s Congress Party, the main opposition.

Modi recently inaugurated a crucial, 14-kilometerstretchof the Bengaluru metro, one that seeks to connectthe suburbs of Whitefield,the city’s first IT hub, withthe central business district around Church Street.The only catch is thata small section in the middle is missing. Comingfrom her home in Whitefield, Nandita Iyer, a doctor and food writer, had to interrupt her journeymidway, take a feeder bus and join the same traffic she wantedto avoid. Twentyminutes later, shegotoff the bus, crossed the road, entered anothersubway station and finally reached Church Street.

Naturally, the unfinishedline is inspiringdelightfulmemes. Aparticularly clever one has superimposedtheschema on Michelangelo’s Creation of Adam. The two unconnected stations appear on the outstretched fingers of God and man. Authorities saythe link will be in place by June. People have left it to divine intervention.

At present,Bengaluru, known for its all-year-roundtemperate climate,is experiencing a strange mix of hot and cold. Political temperatures are rising because of the impending polls, but an icy startup-funding winter is making founders shiver. Tiny venturesare getting money from domestic angel investors, while more mature firmslike Razorpayhave cash in the bank and a visible path to profitability. It’s the ones in between — those yetto go through their Series A, B, and C — that are in trouble. Blockchain-oriented businesses are in a funk because authorities have turned increasinglywary ofcryptocurrencies.Withjittery global banks assome of their biggest clients, Bengaluru’s established, publicly tradedoutsourcing firms are also bracing themselves fora sharp slowdown.

Unlike the perennial shortage of infrastructure, inclement business and financing conditionsare a temporary blip. Bengaluru’seconomic proposition will keep getting stronger. India’s software hubwas never a go-to destination for financial intermediation. But technology — especially the wildly successful payments utility that was conceived as a public good at iSpirt, an influential think tank based in the city — has blurred the boundaries. The$172 billion-a-monthonline payments industry that has gotten built on top of itis a powerful innovation. Indeed, it may be the only reason why Bengaluru-based companies like Razorpay andWalmart Inc.’s PhonePe have emerged as alternatives to traditionalbanking, which isstill concentrated in India’s financial capital of Mumbai.

For new cohorts ofyoungsters to keep solving problems both at home and around the world, someone has to make their nine-mile commute a little easier. Otherwise, India’s best-known global success mightgetcrushed by its own growth.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News.