The Development of the Software Industry in Postreform India: Comparative Regional Experiences in Tamil Nadu, Andhra Pradesh, and Kerala

by Rajendra Kumar


Interest in the role that regions play in economic development has increased in the recent years because of the development of high-technology-based industries, in particular those based on information and communication technologies (ICTs). These industries have gained prominence due to their role in the development of knowledge-based economies. Consequently, developing countries around the world have tried to promote them in a bid to catch up in the race to industrialization. They have provided new opportunities for these economies to leapfrog into the frontier of a technologically sophisticated field. Successful regions within these countries have made full use of these opportunities to develop highly specialized agglomerations of these industries.

Among the success stories of economic development through hi-tech industries, the emergence of India as a major center in the world for software production and exports stands out. This is a fascinating story of economic development in a poor and technologically underdeveloped economy that surged to prominence within a relatively short period of less than two decades. The industry has sustained annual growth rates in excess of 35% for over 15 years since the early 1990s, when the country embarked upon an ambitious economic reforms program. However, within the country, the growth of this industry has been highly uneven, with the southern and the western regions leading the rest of the country. This trend has drawn attention to the role of regional policies in the development of this industry.

India’s success in developing this industry presents us with many puzzling issues that have not been examined previously. In this book, author Rajendra Kumar, a senior office with the Indian government, addresses these issues. The first issue is how an industrially backward economy could rise to the top of a hi-tech industry and become a global player so quickly––a feat considered impossible contemporary economic development theories. The second issue is how the role of the state has propelled the developing economy forward within an overall neo-liberal policy regime; this is a factor that still in understudied. The third issue he examines is India’s success, which becomes more interesting and complicated when we consider the regional variations in the growth of this industry within the country.

Investigating these issues in depth will help us understand how the state can play a role in propelling an economy forward. The book also compares the different ways in which three states in southern India have established their software industries, illuminating the multiple pathways that are available to developing regions for industrial development, as well as how they affect the type and structure of the industry that evolve.

In this first comprehensive study of the role of regional policies in the development of software industry in India, Rajendra Kumar explains the success of these states in terms of four critical factors: availability of adequate skilled labor and specialized infrastructure, pro-employer labor and policy reforms, ethnic linkages of immigrant professionals abroad who returned to establish firms in their native states, and their existing technological capabilities at the beginning of reforms. Contrary to common explanations in the literature, the state did not play a significant role in providing specialized R&D or finance to the industry. He also presents a new “Competitive Flexibility” model and shows that increasing globalization presents tremendous opportunities for developing regions to become globally competitive in a hi-tech field.

This is an important book for all scholars and policy makers interested in economic development through high-technology-based industries.


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