“Information Technology (IT) is an important emerging sector of the Indian Economy. This
paper examines the India’s IT industry and also studied the impact of IT on the Indian
Economy. The IT sector has served as a fertile ground for the growth of a new
entrepreneurial class with innovative corporate practices and has been instrumental in
reversing the brain drain, raising India’s brand equity and attracting foreign direct
investment (FDI) leading to other associated benefits. The Size of this sector has increased
at a tremendous rate of 35% per year during the last 10 years. Its contribution to the
national gross domestic product is expected to be around 8.5 by the year 2010-11, quite
similar to that in the United States today. Special subsidies or export incentives are likely to
be inefficient ways of stimulating the growth of the IT sector, or of positive spillovers for the
rest of the economy. The same stricture applies, to some extent, to State government policies
to encourage the IT sector.