Economic issue- Growth and Impact of the IT industry on the Indian Economy

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India is a land burgeoning with youth and life. It is the 11th largest economy in the world by nominal GDP (Gross Domestic Product) and 4th in terms of PPP (Purchasing Power Parity). India is also making very significant strides forward economically and is poised to become an economic superpower by 2020. While agriculture is still the predominant employer and economic mainstay of the nation, industries contribute a very large percentage to the economy. This contribution has increased more rapidly after the government opened up the economy and revised its economic policy to include liberalisation and globalisation. With more foreign companies entering the country and more Indian companies becoming MNC’s, India is expected to have one of the fasted predicted economic growth rates in the world. Currently its GDP is growing at the rate of an average of 7.5%.

A particular industry that has been instrumental in the growth of the Indian economy is the IT sector. IT stands for Information Technology. The design, development, implementation or management of information systems is referred to as information technology. It describes the production, storage, manipulation and dissemination of information. IT industries account for 6% of the GDP of India and provide employment directly or indirectly for over 2.3 million people. It also contributes very significantly to India’s exports: accounting for around 18% in 2001. India produces roughly 150,000 technically and socially adept engineers every year. Most of them migrate to developed countries and form an integral part of the workforce there, thus becoming India’s most beloved export.

The growth of technology as a field of education started with the establishment of the first Indian Institute of Technology (IIT) in Kharagpur in 1951, by the then education minister Maulana Abul Kalam Azad. The IITs remain, till date, one of the best among the premier technological institutes in the world, providing high quality training in both the theoretical and practical aspects of engineering. The concept of IT as an industry began to take root in India in the late 1960’s. Until then, India used to import the EVS EM computers from the Soviet Union. But in 1968, Tata Corporation formed the Tata Consultancy Services, which soon became the largest software providers of the 60’s. The National Informatics Centre was established in 1975 and was followed by a boom of indigenous IT companies such as Tata Infotech, Patni Computers and Wipro.  Although the growth of industries as such was slow in the pre-liberalisation days, both Indira Gandhi and Rajeev Gandhi were convinced that electronics and telecommunication industry were the future of India. The Indian government created three wide-area computer networking schemes: INDONET – which was intended to serve IBM networks across the country, NICNET- the network created for the NIC, and Education and Research Network (ERNET) which was oriented towards educational research; in the years 1986-1987. With the birth of the 90’s, India saw massive changes in the IT industry. The Department of Electronics created Software Technology Parks of India (STPI) in 1991, which is basically an export oriented scheme for the development and export of computer software, including export of professional services. The decade saw a massive stride in India’s economic growth, partly due to the extensive internet connectivity provided all over the country at that time.  In the 21st century, India has risen to the position of one of the largest IT capitals of the world. As of 2006, technologically inclined services sector in India accounted for 40% of the country’s GDP and 30% of export earnings.

Perhaps no other industrial sector has affected the middle and upper middle class population of India as much as the IT sector. Since the establishment of the IIT, technical education has grown like an ever expanding tree with new engineering colleges opening every day. It is of course the fondest wish of all Indian parents that their child becomes either an engineer or a doctor. Since the early 1950’s technical education has been the ticket out of poverty and to a comfortable life for the people of India. The first great wave of Indians migrating to the US in search of high skilled jobs was during the 1950’s and the 60’s. An estimated 10,000 Indians were settled in the US by the year 1960. This phenomenon, known as “brain drain” triggered off the mass emigration of a large number of Indians to various countries around the world in search of jobs with better pay and comforts. This probably impacted India in a negative way, because even though the population steadily increased, the number of skilled workers in India went on reducing. The second wave of Indian migration to the US occurred in the 90’s. The number of Indian Americans reached 1.7 million in the year 2000. The growth of the IT industry has also helped to forge positive political ties with nations round the global for the mutual exchange of intellectual resources. A joint EU-India group of scholars was formed on 23 November 2001 to further promote joint research and development. On 25 June 2002 India and the European Union agreed to bilateral cooperation in the field of science and technology.

The IT industry has helped the growth of modern India in many ways. Indian engineers and technicians are sought world over for their competency and diligence and strong fundamentals in their field of work and study. India’s technology boom has also helped her shed her “Hollywood” image of being the land of mystics, snake charmers and beggars and has put her on the world map for being a global information hub. The IT industry refers to a broad, umbrella term encompassing various other industries like software industries, hardware industry, computer companies and outsourcing companies. Each of the above mentioned industries have grown at massive rates, providing jobs and products to Indians. For example HCL Enterprise is an electronics, computing an IT company based in India, has become a leading provider of IT service and technological solutions worldwide.  In fact, the IT boom of the 90’s and the 2000’s in India was also accompanied with the growth of BPOs in the nation. India has come under fire from certain groups of people worldwide for “stealing their jobs”, but the fact stands that foreign corporations love India for its abundant availability of skilled labour that can master foreign languages and are satisfied at comparatively low salaries. But with most recent graduates these days being absorbed into IT companies and BPOs and then getting their ticket to America and Europe, India is losing a large chunk of its brains which will perhaps be detrimental to the growth of innovative, indigenous technology and inventions in India.

The IT industry in India has seen massive change, growth and development over the years. The future of this industry seems bright with more growth being predicted. Financial analysts are optimistically predicting strides in software technology development in India. Additionally, the growth of the IT sector is expected to bring about a corresponding growth in other sectors like employment, exports and Foreign Direct Investments. IT sector is also intimately linked to other relevant sectors like biomedical technology, defense and infrastructure. Thus the future of the IT sector will directly impact the growth of the nation.

Rashmi Rajshekhar

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