Bengaluru was a lovely city until the IT crowd ruined it, so goes the joke.

"The reason the IT sector came to the city was its reputation as a great city to live in," a resident told me on a recent visit. "Of course, technology created jobs, but the city has grown so fast and become too crowded."

With an estimated population of 8.5 million in 2011, Bengaluru is India's third most populous city. It was the fastest-growing Indian metropolis after Delhi between 1991 and 2001, with a growth rate of 38% during the decade.

Bengaluru, known as the garden city for its public parks, is still growing. Luxury towers in mid-construction are sprouting, with billboards advertising helipads for aspirational – and wealthy – tenants. The traffic is hellish as three-wheeler auto-taxis, cars and buses compete for space amid a cacophony of klaxons.

In its global monitoring report on the millennium development goals, the World Bank cites Bengaluru as an example of a city struggling to cope with rapid growth on the back of a vibrant IT industry. Companies such as Infosys, the country's second largest IT firm, have their headquarters in India's silicon valley.

In 1998, Bengaluru's incomes were 24% higher than the national average. By 2005, they were nearly 70% higher as the city built on its tradition of compulsory education dating back to the days of the maharajas who once ruled the princely state of Mysore.

The University of Mysore and Bengaluru's engineering college provided the initial cluster of skilled engineers that proved a magnet for firms, creating a virtuous circle – until now. The less positive side of growth has been the proliferation of slums, with at least 850 "unofficial settlements", most of them with no access to water or sanitation.

As the World Bank notes, the city's economic success is creating infrastructure problems, including poor water quality, traffic congestion and housing shortages. Water is a particular problem with 30% of city residents using polluted groundwater. The sewer system does not reach a large part of the city. Average commuting times exceed 40 minutes because jobs are dispersed from the city centre.

"If the water problems or commuting times get worse, skilled people – the city's main asset – will leave for cities that offer better amenities," the bank warns. "How [it] improves the quality of life for its residents will have a considerable bearing on how brightly Bengaluru continues to shine."