Bangalore's outsourcing woes

Much has been talked about outsourcing to Bangalore. Perhaps only we folks who actually live here face the actual issues the city is facing. Of late, however, there has been a lot of talk about the infrastructure woes of the city (and most Indian cities, really). Tyler Cowen was recently in town, and he had some things to say here:

I mean outsourcing from Bangalore, not outsourcing to Bangalore. Apparently production costs are rising out of control in a city that accounts for a third of India's software exports. The major culprit is congestion; a seven-kilometer commute can now take ninety minutes. Population has grown by a third since 1995, and the new metro and airport are badly behind schedule. Bombay has had similar problems. The remedy? Madras (Chennai) is rising in popularity as is Calcutta, despite its propensity to elect communist governments.

The bottom line: Indian infrastructure is chaos. This economy has only a limited ability to absord outsourcing ventures. For instance it is common for current enterprises to supply their own electricity and other public services.

I saw in the Deccan Herald 2 days ago that Azim Premji announced new Wipro offices will be set up in Mangalore and Mysore.

Daniel Drezner had also linked Tyler and had some comments here.

Nitin had an interesting post here on The Acorn about Montek Singh Ahluwalia's recent proposal to use the Indian Federal Reserves to tackle the huge financial need ($160 billion) to solve Indian cities' infrastructure problems. I daresay I agree with Nitin on not allowing the government to force RBI to use the Indian reserves to this purpose, which might not get utilized in the way we want it.