Despite the shift towards more market-oriented economic strategies, there is a continuing need for state policy to play the role of a nurturer of high technology industries in many countries. This is especially true of the information technology (IT) industry, characterised by rapid technological change, necessity of economies of scale, research inputs, and the constant upgrading of skills.

This thesis examines the impact of state policy liberalisation and globalisation on India’s IT firms, and the means by which they are responding to policy changes in the 1990s. India’s IT industry has experienced a variety of policy interventions, from protectionism in the 1970s and early 1980s to liberalisation of the economy in the 1990s, thus providing a rich area for research. The study investigates the impact of policy change on both computer hardware and software components of the Indian IT industry by analysing the legacy of past policies as well as changes in firm-level strategies in the 1990s.

Liberalisation and globalisation are now being upheld by policy makers as the sole determinants of international competitiveness for the Indian IT industry in the nineties. However, the impact of liberalisation and globalisation may be both positive and negative; they provide a pathway to continuous technological upgrading, but at the same time threaten the survival of indigenous IT firms and their technological capabilities, built on the basis of import substitution. This thesis argues that liberalisation implies a continuing link between government and industry, and that it needs to go hand-in-hand with interventionist measures. The state has a continuing role to play in fostering the IT industry and creating the conditions for international competitiveness, even under liberalised economic conditions. Although Indian IT firms are shown to be adapting to the new policy environment, the industry’s future can be better secured by a renewed policy emphasis on developing the domestic industry and market, accompanied by a push for IT consumption as against mere production and export.