An assessment of impact of globalization on Indian IT and ITES exports

Abstract

PurposeThe purpose of this paper is to present the growth trends in IT industry after the period of globalization in 1990s and to investigate the short-run and long-run dynamics between IT software and service exports, globalization and economic growth in India.Design/methodology/approachAnnual time series data on IT exports, net national product and openness index have been collected from National Association of Software and Service Companies, the Reserve Bank of India database on Indian economy and the World Bank for the present study. The methodology adopted for studying the first objective are growth trend models, descriptive statistics and graphs prepared on the basis of data from the IT sector. Growth trends in key performance variables, such as total output, export, domestic output and employment have been analyzed. In the case of second objective, vector auto regression model has been used based on variance decomposition and impulse response function to capture the short-run and long-run dynamics between IT exports, globalization and economic growth in India.FindingsResults of the growth trend model show the relative growth performance of software services receipts shows its strong advancement compared to the other sub-components of current account of balance of payments of India. It is found that economic growth responds positively to the shocks in IT exports and openness of economy. Further, IT software and service exports and openness index contribute to economic growth more in the long-run rather than in the short run.Research limitations/implicationsThe IT software and service exports is dynamic field of economic activity amid heavy dependence on both domestic and external economic and political environment; hence, the rate of change is so rapid, and the relevance of factors may change over time.Practical implicationsThe paper has implications for achieving sustainability in IT software and service exports growth. It is recommended that economic growth can be enhanced by implementing policies that not only improve the efficiency of the sector but also focus on optimization of the potential of the Indian IT industry.Originality/valueThis paper focuses on originality in delineating the growth trends and analysis of capturing the short-run and long-run dynamics between IT exports, globalization and economic growth in India.