IT in Indian Economy

IT and ITES (i.e. Information Technology and Information Technology Enabled Services) have played a great role in framing the economy of India. According to the Information Technology Association of America, “Information Technology can be defined as the study, design, development, implementation, support or management of computer based information systems, particularly software applications and computer hardware.”
In more simple terms, IT deals with the use of electronic computers and computer software to convert, store, protect, transmit, and securely retrieve information.
Back in the history of India (particularly in economic history of India), for the first time, IT was introduced in India by the IBM (International Business Machine) during the decade of 1930s. The core aim of IBM in India was to promote the sales of its products in the Indian market. As a result of good response from the market IBM also decided to establish a manufacturing unit in India itself. The establishment of this manufacturing unit completed in year 1951 and from then onwards till mid of 1970s its business worked very well in the Indian markets. However, thereafter, according to the India’s Foreign Exchange Regulation Act all the foreign owned companies were asked to reduce their equity ownership (particularly in case of IBM it was to 26%). IBM was unwilling to undertake this course and finally decided to quit its business in India. By the end of year 1978, IBM ceased all its operations in India.
Prior to the economic liberalization which under took in year 1991 in India, the economic environment was not much favorable for the IT industry to flourish. A lot many reasons restricted its growth. Some of those were the import restrictions, Forex controls, poor telecom infrastructure, and scarcity of capital for the development of infrastructure, underdeveloped capital markets and distrust among the policy makers.
However, after the year 1991 many reforms were undertaken by the government and amendments were made into its economic policies, which altogether attracted many foreign companies to expand their IT and ITES related operations in India. Some of these reforms were the decentralized power to the regional and state governments and the rationalization of various taxes. The power given to the state government in decision making were enhanced which could lead to better decision making and the rationalization of taxes made the Indian market a favorable and unexplored spot for the foreign companies and investors.
After these and some more reforms undertaken by the Indian government, India became the favrite spot for the offshore services by many of the US and other foreign companies. India was chosen for these offshore jobs because of the following reasons:-
• Stable Economy
• Modern Telecom Infrastructure
• Vast pool of technically sound and skilled workers.
• Government Policies
• English
However it suffered a lot many problems but the Indian Economy did showed a stable growth since independence unlike the other newly independent states which did formed a positive opinion amongst the foreign companies and investors for industrial setup in India. Apart from this after 1991 the government policies were also much amended to attract these companies. English speaking vast pool of skilled workers with proficiency in English language gave India an edge over its competitors for the development of IT industry.
If we look at the employment figures of India then, IT and ITES services in India appointed at about 1.29 million people in the financial year 2005-06 which increased to 1.63 million in financial year 2006-07 and to 2.01 million people in year 2007-09. According to the latest statistics available today, this industry has given employment to about 2.3 million population of the country.
Talking in terms of GDP, IT sector contributed to about 1.2% in the GDP in year 1998 and its contribution increased to about 5.8% in year 2008. However, due to the economic slowdown in year 2009, the contribution of this sector in GDP reduced to 5.2%, however, a quick recovery and growth is expected in year 2010.
IT industry has highly influenced the Banking sector in India. Prior to IT introduction, things were much more complicated in the Indian Banks. IT has reduced the workload and made Banking more competitive in India.

In India, the interface of the Information Technology with agriculture is highly unexplored. This could be the target for the various IT companies across the nation. Recently, an IT service to provide agriculture related information to farmers was launched by an Indian company ITC, under the name eChopal. Such developments are essentially required in nation and can be the next coverage target for IT companies in India.


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