"Improvement in infrastructure is very important to ensure the continued competitiveness of IT and BPO industries," an official said while explaining the rationale behind the move.

At present, the major volume of IT-enabled services is concentrated in seven cities -- Bangalore, Chennai, Mumbai, Hyderabad, Kolkata, Gurgaon and Noida. Government estimates point out that 95% of the IT and BPO service industry is in these cities, with around 36% of services concentrated in Bangalore alone.

According to officials, the IT and BPO business in the country is likely to grow by 2.5 times in the next 10 years. The growth cannot be absorbed in major cities.

As infrastructure in major cities is already under tremendous strain, the IT sector has started migrating to smaller cities. However, the volume of business in the IT sector likely to come to India is huge which even tier II & III towns are unlikely to handle, considering poor infrastructure.

Under the ambitious proposal, the government plans to shift 40% of the business to the upcoming 43 cities by 2018.

The new towns will be properly planned and laid out and endowed with modern infrastructure and good connectivity to the big cities and airports.

These townships will have residential and work areas with all essential services - water supply, power, civic amenities, health, education, transport and entertainment - to meet the civic and commercial needs of the workforce.

The Centre has sought the support of state governments in facilitating creation of these new towns. The proposal suggests that the towns will be developed by private players and state governments will ensure trunk services like electricity, water supply, sewage and drainage.