Information technology and productivity : evidence from India's manufacturing sector

While India's remarkable performance in IT software and service exports may be inspirational for other Indian industries and more so for other countries in the south, the moot question is how has India fared in terms of harnessing this technology for enhancing manufacturing productivity. This paper is an attempt at addressing this issue by analyzing an unpublished data set on the investment in computers and software at the industry level made available by the CSO. The study finds that low level of IT investment intensity in the manufacturing sector notwithstanding, IT investment does have a positive and significant impact on both partial and total factor productivity. The findings of the paper suggest that in a context wherein the policy makers are concerned with low levels of growth in manufacturing output and productivity, policy measures and institutional interventions towards promoting IT diffusion in the manufacturing sector is likely to give rich dividends. Key words: India, Information Technology, Productivity, Manufacturing Sector. JEL Classification No: L6, D24, O14