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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 12: Does India’s Information Technology Industry Need Labor Mobility in an Age of Offshore Outsourcing?

Ron Hira

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


Ron Hira INTRODUCTION For the past few decades, researchers have demonstrated a strong link between investment in information technology (IT) capital and economic growth in developed countries (Dedrick et al., 2003, pp. 1–28). The belief is that investment in IT capital has spurred rapid productivity gains in the US economy and sectors that invested heavily in IT were the leading productivity gainers (Mann 2003, pp. 1–11). More recently, developing countries have been able to leverage their investments in domestic IT infrastructure – an educated workforce and capable IT companies – to drive export-led development even though they have little or no domestic market. The Indian IT services industry is the exemplar leading the wave, exporting the vast majority of its work. NASSCOM, the Indian software services industry association, estimates that the Indian IT industry has grown nearly tenfold from 1994 to 2002. It estimates IT revenues of approximately US$ 16.5 billion in 2002, which accounts for 3.15 percent share of India’s GDP (NASSCOM, 2004). In another sign of India’s growing IT prowess, the largest Indian IT services firm, Tata Consultancy Services (TCS), recently raised more than US$1 billion in an initial public offering of its stock at a time when the market for initial public offerings in the USA is dismal. In addition to its emergence as the offshore IT supplier of choice, India has been able to derive advantage in the business process outsourcing (BPO) markets. In fact, the Indian BPO market is growing three times as fast...

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