India's Information Technology Sector: What Contribution to Broader Economic Development? OECD Development Centre Working Paper, No. 207 (Formerly Technical Paper No. 207)

What contribution can information technology (IT) make to India's overall economic development? This paper provides an analytical framework centred around the concepts of comparative advantage, complementarities, and innovation. There is strong evidence that India has a strong and sustainable comparative advantage in software development and IT-enabled services. Complementarities -- in particular some form of domestic hardware industry as well as growing demand for software within the domestic market -- are also important to sustain the growth of the IT sector, as well as to broaden its developmental impact. The paper also reviews innovative experiments of IT use to improve interactions between citizens and governments, farmers and corporations, and students and teachers in rural areas. The paper concludes with a brief discussion of opportunities for future growth in IT-enabled services, constraints to such dynamics, and possible policy responses. India faces existing and potential bottlenecks in areas such as infrastructure, availability of a skilled labour force, and financing of entrepreneurial activity that can hinder the contribution of IT to broader economic development. Continuing and accelerating cross-cutting reforms in areas such as labour and investment laws and in privatisation is preferable to narrowly targeted tax subsidies and other incentives on the IT sector. (A bibliography is included. Contains 44 notes and 4 tables.)