The Silicon Valley phenomenon is sweeping across new economies like India that are trying to recreate the success of the valley. Will the success be a reality?
This attempt at replication is currently happening all over the world, but I don't think there can ever be an exact replication. But firstly, in centres like India there is a need to productively think about creating centres of innovation and try to use the strengths of the Indian economy and institutions. For example: Taiwan, which is not exactly a Silicon Valley situation, but is trying to build on its traditional model of companies to emerge as a key manufacturing centre.

According to you, there are three key factors in the Silicon Valley success - institutionalisation of VCs, breaking down of the ivory towers to permit free flow of technology and opening up of the labour markets. How far has India got in these factors and how important is it for all three to materialise simultaneously?
I think that India is currently in the early stages. Venture capital institutionalisation is just starting, the breaking down of the ivory towers has not yet begun and India needs to really use and open up its research capabilities. Contrary to theories that the IT industry moves towards low-wage cost regions, your analysis implies that the industry actually builds around high-wage areas - quite different from the situation in India.

Does this mean that costs will eventually start going up as more companies set their sights on India?
The situation has been changing rapidly. People in the US are already talking of having to pay 50 per cent of US wages to top professionals in India. I think that wages will start to rise and a key factor will be domestic innovations that should begin to take place.

Domestic innovation and technology upgradation is more evident in China. Given this fact, is China the one big threat to India?
India needs to develop its domestic market and then look at exports to other countries like China has done. There is a huge market to serve both domestically as well as globally. So I would say that if India remains in the low-wage category, then yes, China is a big threat to India. But if India can create its own value and build its industry, then China cannot possibly overtake India right away. India is currently more of an export-oriented model, one that must be directed also towards the local industry.