Highlighting this new disturbing data is a study by the Associated Chambers of Commerce and Industry (Assocham) and International Data Corp (IDC). The study, due for release soon, lists some of India’s weaknesses when it comes to attracting certain kinds of investments.

The vulnerabilities include varying ideologies of political parties “in coalition governments at the Centre and states” and proliferation of laws, leading to “increase in corruption”.

The report also says that language, religious and cultural differences have led “to riots like Godhra” and that coalition-era disagreements have led to “situations like that in PSU disinvestment”. In fact, of the usual suspects in the list of complaints against India Inc, only one — infrastructure — finds mention here. For the rest, the report dwells on the need to improve, or at least change, social and political situations.

Business chambers, happy so far with reeling off tax, wage and labour woes, are now asking potential investors and clients in the business transformation outsourcing (BTO) sector to prepare to tackle diversity and multiculturality as well.

BTO is an offshoot of the business process outsourcing (BPO) industry that is new to India but has a potential to grow to around $680 billion by 2008, according to industry figures quoted in the report. Overall, the report finds India is at an advantageous position as far as outsourcing is concerned and stresses that India is a country “one cannot afford to ignore”, now that it also has crossed the $5 billion FDI mark.

But also, according to others who were part of the study, called ‘Business Transformation Outsourcing: 3rd Generation Outsourcing’, now is time for India to tackle social issues head on.

Says Raman Roy, founder, Quattro and member of Assocham's Committee on BPO: “Whether you treat cultural differences as a plus-point or a negative depends on your viewpoint but can you or I wipe it (Godhra incident) out? We can’t. This report brings forth certain things that are on the mind of potential customers and we need to tell them how to manage business continuity under these circumstances. Though not show stoppers, these issues need to be tackled.”

One of the many ways in which cultural diversity — and it's frequent negative fallout —can be handled is by spreading the risk to several geographies outside India, according to another company that was actually interviewed for this report. Says Sabyasachi Satyaprasad, research director, neoIT: “It is not that there are specific cultural issues going against India, but at the same time, we must remember that India is competing against countries that face none of these cultural problems.”

“What we recommend to potential clients is a fundamentally strong economy and a healthy social environment not bothered by war or internal disturbances. It is necessary for us to point out the risks so that there can be a strategy to mitigate them,” he says.