India is now in a better position to tackle the basic infrastructure problems that may have discouraged some UK firms from outsourcing IT work to the country in the past.

That is the view of B Ramalinga Raju, chairman and co-founder of Indian IT services provider Satyam Computer Services, who claimed this week that increased foreign investment and efforts by the government to streamline bureaucracy meant infrastructure projects could now be completed far quicker.

"The systems today are in much better shape to get infrastructure built quickly," Raju said. "For example it used to take years to get a power purchase agreement signed or get planning permission processed, but the negotiation time has really shortened... [Lack] of infrastructure is still an issue but we can see the light at the end of the tunnel."

Speaking at the company's headquarters in Hyderabad he also pointed to the city's plans to have a new international airport and ring road built by the end of next year as evidence that foreign capital is flowing into the country. " China has focused on building hard infrastructure in the past, while India focused on the soft infrastructure," he said. “But now that situation is reversing."

His comments were echoed by Ratna Prabha, secretary for IT and Communications at the state government of Andhra Pradesh, who argued that the opening of a new airport and other infrastructure investments, coupled with the generous tax breaks and other incentives such as rebates on some property costs, made the region an increasingly attractive location for IT firms’ investments. She pointed to recent investments by Satyam, TCS, Infosys, Oracle and Microsoft, which has its second biggest campus in the world in the region, as proof that Hyderabad is a viable alternative to the more established IT hub of Bangalore.

Basic infrastructure investment, in particular in roads and power supply, has become an increasingly important issue for firms moving work to India in recent years as rolling blackouts in some cities have reduced reliability. And some critics have said that as the need for electricity, roads and other basic infrastructures continues to climb the Indian government will struggle to keep pace with demand.

Speaking recently, Martyn Hart chairman of UK's National Outsourcing Association said the relatively poor infrastructure outside the four or five man cities was hampering the Indian IT industry's expansion. He added that the focus on these cities was also contributing to the wage inflation that has emerged in the recent years.

"No doubt there are plans to build the infrastructure," Hart said. "But that will increase pressure on the government to tax the IT firms more heavily. The government talked about it last year but backed down, but as the industry expands, pressure will increase to revisit the issue. UK firms are taking advantage of the Indian infrastructure and education system so there will be calls to tax them."

Raju admitted that the tax breaks that IT firms currently receive could ultimately be removed, but insisted that they are extremely beneficial to the country as a whole as the profits enjoyed by the Indian firms feed back into the wider economy.

Any increase in costs from taxation may be a long way off, however. Prabha said that many of the current incentives are guaranteed until 2015 and could be easily extended beyond then.