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Information Communication Technology and Economic Development

Information Communication Technology and Economic Development

Learning from the Indian Experience

Edited by Tojo Thatchenkery and Roger R. Stough

Information Communication Technology and Economic Development reveals new insights regarding the complex process of globalization. It shows how the generation and circulation of intellectual capital in the US and India in ICT have led to greater productivity in the US while facilitating the economic development of India. Most industrialized nations now see the vast intellectual capital-based services that India provides at extremely competitive rates as key to their own national competitiveness in the global arena. The contributors’ findings suggest that India’s ICT-led growth will accelerate in the next ten years, launching India as a major global economic power next to the US and China.

Chapter 5: An Analysis of Factors Responsible for the Indian Information Technology Sector Growth: Signaling Quality

Aparna Sawhney

Subjects: development studies, development economics, economics and finance, development economics, innovation and technology, technology and ict


Aparna Sawhney INTRODUCTION The emergence of the Indian information technology (IT) industry in the global economy in the 1990s has inspired academicians, industry analysts and policy makers alike, as one of the most amazing achievements of a developing country (Heeks and Nicholson, 2002; Krishna et al., 2000; Heeks, 1996; Bajpai and Shastri, 1998; Moitra, 2001). The growth of the IT industry, one of the fastest growing industries in the country, has been driven by the export of software services. The export revenue from software services consistently grew at more than 50 percent per year during 1995–2001, and the earnings constitute the bulk of India’s overall invisible receipts. Indeed, the software industry’s spectacular growth has encouraged other industrializing countries in Asia to replicate the Indian Silicon Valley phenomenon in a bid to accelerate their development process. The software industry is still small compared to other traditional industries, like textiles, in India and accounts for approximately 2 percent of the country’s gross domestic product (GDP). However, given its current growth rate, it could account for over 7 percent of GDP by year 2008 (NASSCOM–McKinsey, 2002). The software services industry is a mature sector in India (compared to other developing countries), and consists of some of the largest software services exporting firms. While initially firms largely provided on-site services, currently offshore delivery is the preferred business model, especially since global business outsourcing has been increasing. The National Association of Software and Service Companies (NASSCOM) of India estimates that one in every...

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