The paper examines the impact of institutional environment on the growth of the Indian information technology (IT) industry. The study reveals that before the first generation of reforms, that is, 1991, the government was pursuing a structuralist approach toward economic development. After liberalization in 1991, the government embarked on pro-active economic policies for the diffusion and production of IT. Consequently, the IT industry experienced an unprecedented growth rate in domestic as well as export markets. However, foreign direct investment (FDI) policies have not been successful in attracting the desired level of foreign investment, which is very important for a high-tech sector such as IT hardware manufacturing. The study suggests that immediate corrective measures need to be taken to augment the IT manufacturing industry, which can significantly contribute to national economic development and employment generation.
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