Capital of the south-east state of Andhra Pradesh, Hyderabad is the fourth largest city in India, and one of the most developed. With a world-renowned business school and top unversities, Hyderabad is second only to Bangalore as an IT exporter, and is home to India's second largest film industry; but it is its increasing popularity as a centre for domestic and multinational companies that is really forcing the creation of a transport infrastructure in keeping with its growing reputation. And with a population hurtling towards eight million (part natural growth, part business relocation), the need has never been more pressing, and the opening of Rajiv Gandhi International Airport in March never more welcome.

Infrastructure is the Achilles' heel of the Indian economic miracle, and structures such as Hyderabad's new airport are a litmus test for India's ability to construct the roads and transport links that are vital to prevent the economic growth from spluttering out. And with the list of international companies now operating in Hyderabad reading like a who's who of the IT, consulting and financial services industries, keeping the city moving is more important than ever. The city, which fittingly calls itself Cyberabad, is home to Microsoft's largest facility outside the US, GE, Bank of America, IBM, Dell, Yahoo, Accenture, Oracle, Verizon Wireless, Computer Sciences Corporation, Qualcomm and Indian IT giants Tata Consultancy Services, Wipro, Infosys, and the list goes on. It is hoped that the new airport will be key to attracting more business to a city that has ambitious plans to launch even more business corridors. On the drawing board are Giga City, SemIndia/Fab City, and Elixir City for medical tourists.

What is more, Hyderabad is a large and growing shipper of bulk drugs and pharmaceuticals, and since its construction, the airport has taken on an increasingly important role as a route for cargo transport. Take Dr. Reddy's - a homegrown producer of generic drugs headquartered in Hyderabad. It already generates 60% of its sales from the US and Europe and is now building a plant in Hyderabad to produce drugs for developing countries; when it's finished by 2012, it is estimated it will be the largest drugs plant in Asia.

Hyderabad's new hub is the first airport to open under the Indian government's new greenfield policy, which gives a larger share to private developers: 74% is held by Indian energy and infrastructure developer GMR Group and 26% by Andhra Pradesh state .

The airport was built at a cost of €791m (INR49.9bn), and, like many other similar structures worldwide, it was designed with future growth in mind: a modular construction has been used, which is easily expandable and adaptable as passenger traffic to Hyderabad increases; and currently only 48% of the available land has been built upon, further facilitating future expansion. At present, 5.87 million passengers travel through Hyderabad airport every year (up from 1.9 million just five years ago), but this is expected to double to 12 million passengers a year by 2012 when the first phase of expansion is complete. Ultimately, the airport will service up to 18 million people with modular expansion, though there is the option to cater for up to 40 million passengers a year with the purchase of some of the surrounding land.

The airport currently handles around 280 take-offs and landings per day, with new routes and carriers being added on an almost monthly basis. Three new domestic routes recently opened to Raipur, Pune and Ahmedabad; Gulf Air began flying daily from Bahrain to Hyderabad in July; and British Airways will start flights from London Heathrow five times a week in December, adding to the list of seven other international destinations, and keeping company with the 10 domestic and 11 international carriers, including Lufthansa and Emirates, that currently use the airport.

Unlike the headaches of flying through Heathrow's Terminal 5 during its first few weeks of operation, the start-up glitches for Rajiv Gandhi airport have been fairly tame. Thus far, no flights have been cancelled but there have been a few rough spots in the initial phase - delayed baggage deliveries and aerobridge openings, and wrong gate postings, says Shankar Chelluri, spokesman for GMR Group. Teething problems, he claims.

The Rajiv Gandhi International Airport, named after the assassinated former prime minister (who was also a professional pilot), will have an airport hotel within three minutes' drive when the 300-room Novotel opens in June; free Wi-Fi for the first 15 minutes; a paid lounge with 25 nap rooms, and showers; not to mention international chains Pizza Hut, KFC, and Hard Rock Café.

Further down the road, an 'aerotropolis' is envisioned: a planned industrial mega- development along the lines of the one currrently under construction around Indira Gandhi airport in New Delhi. The project, which will eventually cost €625m, has received initial financing from Axis Bank to build a rail line to Hyderabad's city centre, 22km away, which could be up and running as soon as 2012, believes Chelluri.

GMR Group has applied for a coveted LEED (Leadership in Energy and Environmental Design) award for Rajiv Gandi airport's green design, which so far only Boston's Logan Airport has managed to snag. In Rajiv Gandhi there are built-in sensors that adjust lighting and air conditioning to conserve energy, following the movements of people and adjusting to night and day; a glass ceiling filters light but blocks the heat of the sun from entering, so reducing the need for daytime lighting; the water from the air conditioning is recycled to irrigate the surrounding area; all treated water is reused; and rainwater is collected for use.

But there is a dark side to Hyderabad that threatens to dampen the breathless optimism surrounding the city and its new airport. The city has been rocked by terror attacks - 14 months ago, two explosions ripped through an amusement park and a restaurant - and it holds the dubious rank as the third most targeted Indian city by terrorist organisations, troubled Jammu-Kashmir aside. Analysts say the city's growing appeal as an IT and biotech Mecca are making it attractive to terrorists, too, who believe a strike against Hyderabad is a symbolic strike against India's growing economic and international profile.