What Contribution to Broader Economic Development?(
Professor of Economics
University of California, Santa Cruz
Santa Cruz, CA 95064, USA
First Draft: October 2002
What contribution can information technology (IT) make to India’s overall economic development? This paper offers some perspectives that can help answer this question, using concepts and analysis from economic theory. It examines the theory and evidence for comparative advantage, complementarities, and a special role in the innovation process, as factors that make IT special. The paper also considers opportunities for future growth in India’s IT sector, existing and potential constraints, and possible policy responses that can help IT contribute to broader economic development.
Keywords: information technology, software, complementarities, recombinant growth
JEL Classification: M21, L63, O12, O3
In his foreword to the new NASSCOM-McKinsey Report (2002), India’s Minister for Communications and Information Technology calls for a joint industry-government effort to “ensure that the Indian IT sector remains a dominant player in the global market, and that we emerge as one of the leading countries of the new millennium”. The first of these goals remains a challenge, but it is one for which India’s information technology (IT) industry seems to be well prepared. The second stated goal is much broader, much deeper, and much harder to achieve. Does it make sense to pin so much hope on India’s IT industry? What contribution can it make to India’s overall economic development? Can it help change the country, reduce poverty, change people’s lives for good? Or will the benefits be restricted to an educated elite with access to jobs and power? This paper offers some perspectives that can help answer these questions, using concepts and analysis from economic theory.
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