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The
dramatic expansion of India's Information technology (IT) sector
during the 1990s, albeit from a low base, is widely seen as heralding
India's emergence as a global IT and software powerhouse. This
'popular' perception has underlying it a less pervasive
but more sophisticated argument. According to that argument, there
are certain defining features of the information technology industry
which provide a new digital opportunity to countries with the requisite
knowledge- and skill-base and with the appropriate policy regime.
And as nations like India exploit that digital opportunity, it is
expected, that the wide, persisting and even growing technology, productivity
and income gaps between the developed and developing countries would
shrink, creating a whole new international economic order.
The
new optimism generated by the IT 'revolution' stems in part
from the rapid proliferation of an almost borderless industry. The
two main sources of information on the IT sector in India are IDC
(India) and the National Association of Software and Service Companies
(NASSCOM). According to IDC (India), the annual rate of growth of
IT spending in India was well above 20 per cent in most years during
the 1990s, with growth peaking at a remarkable 59 per cent in 1994-95.
NASSCOM's figures too reflect a rapid growth of the IT market
in India from Rs. 32.3 billion in 1993-94 to Rs. 135.7 billion in
1998-99 (Chart 1). The turnover of the IT industry was, however, much
larger than this, given the rapid increase in software exports. Software
exports have risen at a remarkable rate, from an estimated $150 million
at the beginning of the decade to close to $4 billion in 1999-00.
According to NASSCOM, software exports rose by 57 per cent in 1999-00.
Chart 1 >>
Table 1 >>
The
current size of the domestic IT industry can be gleaned by combining
figures from IDC and NASSCOM. Domestic IT spending is estimated at
Rs. 16,538 crore in 1999-00 by IDC. Add to this NASSCOM's estimate
of software exports to the tune of Rs. 17,150 crore in that year,
and we are speaking of an industry with a turnover of around Rs. 35,000
crore a year. NASSCOM estimates that the IT industry grew from about
Rs. 6345 crore ($2.04 billion) in 1994-95 to Rs.24,781 crore ($6.04
billion) in 1998-99 (Chart 2).
Chart 2 >>
At
the core of the industry's expansion worldwide and in India lies
the dramatic increase in computing power being delivered at ever-decreasing
costs by the emergence and rapid transformation of microprocessor
technology. The consequent ability to process and execute a huge number
of instructions in imperceptible time spans has had revolutionary
implications. First, it has created an industry which produces the
hardware and software needed to allow individuals, organisations,
small businesses and corporations to directly exploit the benefits
of such computing power. Second, it has substantially transformed
other industries, which can now use the capacity to store information
and execute instructions to automate and change the manner in which
they conduct and manage their processes and operations. Information
technology is in part revolutionary because it ensures and necessitates
the transformation of productive capacity in almost all sectors. Finally,
it leads to a dramatic expansion of the size and scope of the services
sector (across a wide spectrum including finance, banking, trade,
entertainment and education). This results partly from associated
technological developments that find new uses for the massive computing
power that is cheaply available, partly from the huge market that
developments in communications and networking technology create, and
partly from the fact that the increasingly ubiquitous PC becomes the
vehicle to deliver a range of services, besides being a device in
its own right. The microprocessor is not just the core of the IT revolution,
but stands at the centre of the convergence of the information, communication
and entertainment sectors.
But it is not just this remarkable and wide-ranging expansion of the
information technology sector that generates the new optimism with
regard to the prospects for developing countries within the current
world order. That optimism also stems from the understanding that,
unlike the 'routinised'
technologies which dominated development during the immediate post-World
War II years, the new 'entrepreneurial' technologies driving
the IT sector are seen as being characterised by a knowledge-base
for innovation, which is more rapidly transmitted across the globe,
and levels of investment that are much lower and often easily afforded
by even private investors in developing countries. This facilitates
entry by small players from developing countries into a rapidly expanding
segment of the global economy. Further, since much of IT production
from assembly to software generation is skilled-labour intensive,
the availability of cheap skilled labour in countries like India is
seen as giving them a decisive edge in the international competitive
battle in this sector.
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