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IT and ITES as an Engine of Growth : An Exploration into the Indian Experience

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  • Seema Joshi

    (IEG)

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    Abstract

    India emerged as one of the fastest growing economies of the world during the 1990s because of the spectacular dynamism shown by the services sector. Indias services sector has been burgeoning fast and one of the major drivers of the growth of services sector is information technology (IT) and information technology enabled services (ITES). It is well documented in literature that IT impacts growth by different channels. In this study we try to empirically verify the question : Can IT and ITES be an engine of growth? Using micro-level data of 100 households of 20 IT and ITES firms along with secondary data we tried to estimate the extent of indirect employment generation at macro level and the share of IT and ITES in total employment and total value added. According to our study, one job for skilled professional employed in IT and ITES spins off jobs for 0.48 semi-skilled, low skills or unskilled workers. As per our estimates, the 16 lakh workers who are expected to be directly employed in IT sector in the FY 2008 would generate secondary employment for 7,68,000 people which would constitute 0.16 % of total employment. However, the share of consumption expenditure of 16 lakh professionals would be 20% of total value added. Assuming the consumption expenditure of the IT and ITES workers and total value added to be the same/constant when we tried to assess the contribution of consumption expenditure of 2.3 million workers (who are projected to be directly absorbed by IT sector by 2010, NASSCOM, 2005) to total value added it comes out to be 29% of total value added. The study says that the proportion of IT-ITES in total employment may be small but its contribution to total value added is still very high. Indeed IT and ITES can be an engine of growth in Indias economy by way of generating demand impulses in the economy as has been hypothesized and shown through the present study. Keeping in view the contributions of this sector and its huge untapped potential as evident from the present study and various other studies, there is a need for introduction and implementation of policy initiatives to address the challenges faced by this sector and to sustain the growth driven by the services sector.

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    Bibliographic Info

    Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22926.

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    Date of creation: Jan 2009
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    Handle: RePEc:eab:develo:22926

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    Related research

    Keywords: fastest growing economies; spectacular dynamism; the services sector; burgeoning fast; IT and ITES engine of growth; employment generation;

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    1. Martin L. Weitzman, 1995. "Recombinant Growth," Harvard Institute of Economic Research Working Papers 1722, Harvard - Institute of Economic Research.
    2. Röller, Lars-Hendrik & Waverman, Leonard, 2000. "Telecommunications Infrastructure And Economic Development: A Simultaneous Approach," CEPR Discussion Papers 2399, C.E.P.R. Discussion Papers.
    3. Arora, Ashish & Athreye, Suma, 2001. "The Software Industry and India's Economic Development," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    4. Pohjola, Matti (ed.), 2001. "Information Technology, Productivity, and Economic Growth: International Evidence and Implications for Economic Development," OUP Catalogue, Oxford University Press, number 9780199243983, September.
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