The Software Industry and India's Economic Development

Wider Discussion Paper No. 2001/20

32 Pages Posted: 6 Feb 2002

See all articles by Ashish Arora

Ashish Arora

Duke University - Fuqua School of Business; National Bureau of Economics Research; Duke Innovation & Entrepreneurship Initiative

Suma Athreye

Brunel University London - Brunel Business School

Date Written: 2001


This paper assesses the contribution of software to India's economic development paying particular attention to the role of the software in the absorption of labour and the development of human capital in the Indian economy. India's specialisation in software has been driven by two sorts of wage advantages that have reinforced each other: the lower wages for Indian software developers relative to that of their US and European counterparts makes Indian software cheaper in global markets, while the higher wages earned by software professionals in India relative to that in other industrial sectors has ensured a steady stream of supply of software professionals. However, the impact of this growth has been limited to a small section of the Indian economy, and there are questions whether the current growth can be sustained without a significant growth of domestic demand. We believe that export led growth is sustainable in the medium term. On the other hand, the success of the software industry has contributed to an increase in the relative value of professional workers' programmers, but also managers and analysts. In turn, the growing importance of human capital has lead to innovative models of entrepreneurship and organisation, pioneered by the software sector, which are slowly taking root and spreading to other parts of Indian industry. A potentially important and under appreciated contribution of the software industry is thus as an exemplar of good entrepreneurship and corporate governance to the rest of Indian industry. Though less visible than the macro contributions to employment and foreign exchange, this role is a source of productivity improvement for all industry, which can have powerful long- term benefits for India's industrialisation and growth.

Keywords: Software, Economic Development, India, Organizational Innovation, Human Capital

Suggested Citation

Arora, Ashish and Athreye, Suma S., The Software Industry and India's Economic Development (2001). Wider Discussion Paper No. 2001/20. Available at SSRN: or

Ashish Arora

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

National Bureau of Economics Research

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Suma S. Athreye (Contact Author)

Brunel University London - Brunel Business School ( email )

Kingston Lane
Eastern Gateway Building
Uxbridge, Middlesex UB8 3PH
United Kingdom

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