The IT Industry and Economic Development in India: A Critical Study

Abstract

Many scholars have questioned the role of the IT industry in India’s economic development. Some have correctly highlighted the limited impact of IT firms in creating occupations accessible to less-educated people or the modest impact of industry output on the livelihoods of people from poorer households and communities. There are thus strong arguments against governments giving fiscal and industrial priority to the IT industry. However, this article explains why the state is unlikely to heed this redistributive agenda. It argues that state assistance to the IT industry has been predicated upon four main factors: India’s surplus of skilled and technically qualified young workers, the dominant role of software services within the IT industry, the formation of political relations between industrialists and state institutions and, finally, the crucial role of software service export earnings in the stabilisation of India’s external position. Even the uncertainty generated by the global financial crisis has, thus far, been unable to dislodge software service exports from their central role in India’s economic policymaking framework. Short of a radical change in the status quo, we are unlikely to see a commensurate change in policy settings.