Can IT and ITES be an engine of growth for India: An empirical analysis

Date01 April 2011
Published date01 April 2011
AuthorSeema Joshi
Subject MatterPublic policy & environmental management
Copyright © 2011 WASD 25
*Corresponding author: University of Delhi, India; e-mail:
Can IT and ITES bE an EngInE
of growTh for IndIa:
an EmpIrICal analySIS
World Journal of Science, Technology and Sustainable Development, Vol. 8, No. 1, 2011
Seema Joshi*
University of Delhi, India
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. India’s services sec-
tor has been burgeoning fast and one of the major driver’s of the growth of services sector
is Information Technology (IT) and Information Technol ogy 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 em ployment 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 expendi-
ture 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 contribu-
tion to total value added is still very high. Indeed IT and ITES can be an engine of growth
in India’s economy by way of generating demand impulses in the economy as has been hy-
pothesised 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.
Keywords: fastest growing economies; spectacular dynamism; the services sector; burgeoning fast;
major driver’s of the growth; IT and ITES engine of growth; employment generation.

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