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The general thought behind this quotation mark is that one who will non accommodate with a new engineering revolution, will dawdle behind in the procedure of development. Peter A.Kwaku agrees with this idea in his work where he has mentioned that “ History reveals that societies that acknowledge the importance of new engineerings and tackle them win and those that are deprived of entree to them or societies that resist the tide of Technological development frequently fail to progress in human advancement ” ( Kwaku Kyem, 2010 ) . It is apparent that engineering has shaped the universe today with progresss in H2O power, steam power, electricity, plastics and motorisation ( Freeman & A ; Louca, 2001, p. 306 ) .On a broader degree, Technology is a “ complex societal endeavor ” that extends the human abilities to transform the universe. So far it has been the most powerful tool in the procedure of development of civilizations.There are groundss from pre-historic times till today where the human society has used Technology to better their public assistance ( Kwaku Kyem, 2010 ) .

Technological Revolutions

Technological advancement is by and large considered to be a slow procedure, which takes little incremental stairss in bing technology.But when the gait of this advancement exceptionally speeds up it gives rise to a technological revolution ( Hornstein, 1999, p. 1 ) . From a historical position the First Industrial Revolution in the 18th century is considered to be the landmark event in the class of technological advancement. As quoted in the work by A imurina & A ; Tica, this was the epoch when machines substituted human accomplishments and gave rise to a “ modern economic system ” ( A imurina & A ; Tica, 2006, p. 4 ) . Although the agricultural revolution started off the tendency of economic prosperity by betterments in productiveness, the First Industrial revolution remains the discovery from the agricultural society merely because of technological advancement which made it possible to get away the Malthusian trap ( See Appendix A ) . “ Technological revolutions are defined by a powerful bunch of new and dynamic engineerings, industries and merchandises, plus associated substructures, and together be capable of conveying about a long-run rush of productiveness and development ” ( N.K.Hanna, 2011, p. 31 ) .Nevertheless, every technological progress has its ain lifecycle and once it lives its life, it is replaced by another technology.But this is a clip devouring procedure. A imurina & A ; Tica say that “ these procedures are more evolutionary than radical ” ( A imurina & A ; Tica, 2006 ) .The Second industrial revolution therefore can be seen as a extension of the first industrial revolution with farther betterments in bing stuff engineerings and new inventions ( A imurina & A ; Tica, 2006 ) .The following technological revolution, the so called Information and Communication Technology ( ICT ) Revolution is being considered to hold an impact no less than the impact of the First industrial revolution.With the technological progresss in ICT, the world has put its first measure into a new epoch of information age. As put frontward by Alexander G. Flor in his publication “ Developing Societies in the Information Age: A Critical Position ” , there has been a “ planetary displacement in resources of power from land, labor, and capital to information ” ( Flor, 2009, p. 11 ) . Where “ Land was the footing of society-from economic system to civilization, from household to political relations ” in the Agricultural age. Then came the Industrial age, which was dominated by machines and capital was the most of import resource. Similarly, the Information age is characterised by information as its nucleus resource ( Flor, 2009, pp. 11-12 ) . This information age with information as its cardinal resource and the information and communicating engineerings as its critical tool has resulted in an economic paradigm known as the “ New Economy ” ( Argandona, 2003, pp. 3-22 ) . Sonia Jurich in her paper “ The Information Revolution and the Digital Divide ” argues that natural stuff and inexpensive labor is non plenty for the sustainability of this New Economy.She believes that the ICT ‘s have a pivotel function to play in the New economic system because they have reduced the practical distance between states and hence license production in any corner of the world.She farther provinces that its the Knowledge and non the labor that helps economic systems sustain in such a planetary economic system ( Jurich, 2000 ) . Matti Pohjola has besides discussed about the impression of “ New Economy ” in her research paper “ The New Economy: facts, impacts and policies ” wherein she states that around the 1990 ‘s the full universe had started believing that the universe economic system was undergoing a structural alteration. She farther adds that this alteration was brought approximately by globalisation and ICT revolution and from so onwards the ensuing “ superior economic construction ” was known as the New Economy ( Pohjola, 2002 ) .Infact there have been multiple names that have been interchangeably used with “ New Economy ” in the huge literature on ICT like a ‘knowledge economic system ‘ , a ‘digital economic system ‘ , ‘post-industrial society ‘ , an ‘information society ‘ , an ‘innovation economic system ‘ , a ‘network economic system ‘ , a ‘weightless economic system ‘ , and an ‘e-economy ‘ ( Cohen, et al. , 2000 ) . The grounds of such a New Economy was first seen in the United States of America station 1990 where ICT accounted for a one-fourth of the Economic growing. Its effects were across all other industries as good. The productiveness had increased and costs had reduced. It was termed as a “ surpassing engineering ” merely as the railroads and cars in the 19th and twentieth century severally ( Shephard, 1997 ) .

ICT ‘s and Productivity Paradox

However before the 1990 ‘s, there was a batch of agnosticism about the potency of Information and Communication Technologies. For case in 1987, the Nobel Laureate Robert M. Solow criticized the big investings in information engineering by saying that ‘you can see the computing machine age everyplace but in the productiveness statistics ‘ ( Pohjola, 2002, p. 135 ) .At the same clip there were even optimists like Paul David who believed that the productiveness rush caused by ICT ‘s was accompanied by a clip slowdown merely like the earlier engineerings. An illustration are the electric motors which did non ensue in productiveness benefits in the beginning but were subsequently responsible for a productiveness rush in the 1920 ‘s in the U.S fabrication industry ( J.Gordon, 2000, p. 3 ) .Nicholas Crafts from London School of Economics has conducted a survey to compare the part of steam, electricity and ICT to economic growing. And as opposed to the popular belief of many, he concludes that, “ Even before the mid-1990s, ICT had a much bigger impact on growing than steam and at least a similar impact to that of electricity in a similar early stage ” ( Crafts, 2001 ) . He farther adds the Solow ‘s productiveness paradox is based on “ unrealistic outlooks ” ( Crafts, 2001, p. 15 ) .On the other manus in a recent survey Robert D. Atkinson and Daniel D. Castro have highlighted in their paper that there are skeptics who still question the ability of Information and Communication Technologies to fit up with the stuff engineerings of the yesteryear which changed the universe. Although Atkinson and Castro strongly disagree with this thought and believe that invention in stuff engineerings have exhausted and it is non wise to anticipate any more way breakage large inventions in these countries. They say that the universe is still in a really early stage of ICT revolution and “ … it is bring forthing a universe that maps in radically different and better ways, with persons and organisations able to entree and utilize a huge array of information to better their lives and society… ” ( Atkinson & A ; Castro, 2008, p. 3 ) . They think that comparing ICT and the engineerings of the yesteryear is unjust because they are wholly different and there can non be a common step of comparing their impacts ( Atkinson & A ; Castro, 2008, p. 3 ) . Although a batch has been discussed about the uncertainness environing the short term impact of ICT on economic growing but its long term impact is still typically underrated ( N.K.Hanna, 2011 ) .

Technology and Economic Development

Whatever be the instance, it is interesting to detect that economic historiographers and growing comptrollers have ever been acute to analyze the effects of engineering on economic growing and development. Hulten high spots in his research that, for the past 200 old ages, the technological revolutions have had a immense impact on Economic advancement ( Hulten, 2000, p. 1 ) .According to Homstein, it is indispensable to understand the impact of technological advancement on productiveness growing because productiveness growing defines the economic system ‘s long-run growing ( Hornstein, 1999, p. 1 ) .According to Carlota Perez this relation between Technological revolutions and Economic development can really good be explained by presenting the construct of Techno-Economic Paradigm. But before that let us hold a brief apprehension of the term Technology Revolution. Technology Revolution can be defined as, “ … a set of interconnected extremist discoveries, organizing a major configuration of mutualist engineerings ; a bunch of bunchs or a system of systems ” ( Perez, 2010, p. 189 ) .For case the ICT Revolution is marked by a system of engineerings that were developed around semiconducting materials and microprocessors. Then came the inter-related and mutualist set of engineering systems like personal computing machines, telecom, cyberspace, package ‘s etc. The instance has been similar for all the earlier revolutions which started with a individual invention and with a broad market credence gave rise to a series of other related inventions. However non every aggregation of inventions or interconnected engineerings can be called a Technological Revolution. Technological Revolution is characterised by the influence of a Techno-Economic Paradigm which has the capacity to transform the bing industries, activities, substructures or for that affair the Economy as a whole. As defined by Perez a techno-economic paradigm is, “ a best pattern theoretical account for the most effectual usage of the new engineerings within and beyond the new industries ” ( Perez, 2010, p. 189 ) . Another definition provided by N. K. Hanna in her book Transforming Government and Building the Information Society says that “ Each technological revolution provides a new set of all-purpose, permeant engineerings and a corresponding set of new organisational patterns for a important addition in productiveness in bing sectors. This combined best pattern is referred to as a techno-economic paradigm. ” ( N.K.Hanna, 2011, p. 30 ) .With the construct of techno-economic paradigm Perez states an luxuriant definition of technological Revolution, “ a technological revolution can more by and large be defined as a major turbulence of the wealth-creating potency of the economic system, opening a huge invention chance infinite and supplying a new set of associated generic engineerings, substructures and organizational rules that can significantly increase the efficiency and effectivity of all industries and activities ” ( Perez, 2010, p. 189 ) . Diffusion of the engineerings that constitute a technological revolution and its related techno-economic paradigm is a slow and long procedure. Once the economic system and the society start absorbing its effects, the productiveness additions and leads to “ great rushs of development ” ( Perez, 2010 ) . The universe is presently sing such a paradigm displacement due to the Information and Communications Technologies ( ( N.K.Hanna, 2011, p. 30 ) . A publication by United Nations University WIDER reinstates the normally held belief among economic experts that engineering is an of import drive force for economic growing. It farther provinces that “ as ICT is widely regarded as the current manifestation of the on-going sequence of technological revolutions, ICT is now seen as the cardinal factor driving economic growing in the current planetary economic system ” ( Clarke, 2003, p. 9 ) .


As discussed above, the impact of technological advancement on economic growing and development has been the focal point of a long running argument in the economic literature. ( Heshmati & A ; Yang, 2006 ) .Since the 1980 ‘s this argument has centred on Information and Communication Technology triggered by the construct of “ Productivity Paradox ” . This originated from the popular belief that engineering contributes to economic growing by bettering productiveness. However, there was barely any productiveness growing in the United States despite immense investings in Information and Communication Technology ( Kraemer & A ; Dedrick, 1999 ) ( See Appendix B ) .This issue was besides applicable to other developed states during the decennary. Nevertheless, many economic experts and bookmans continued to analyze the effects of ICT on productiveness during the last decennary of the twentieth century to happen out if the effects were relentless. These surveies showed that the GDP growing and productiveness was low but positive during the early 1990 ‘s, nevertheless it accelerated during the late 1990 ‘s. ( OECD, 2002 ) .A study by The United States Department of Commerce claimed that ICT was responsible for approximately 50 % addition in productiveness during the 2nd half of 1990 ( The U.S Department of Commerce, 2000, p. six ) .

A batch of these surveies around 2000, indicate that the return to investing in Information and Communication Technology have really resulted in important productiveness addition and overall growing ( ( IMF, 2001 ) ( Dedrick & A ; Kraemer, 2001 ) ) . Some of the recent surveies besides blame wrong productiveness measuring, misdirection jobs, holds due to engineering installing and unequal usage of engineerings for the issue of “ Productivity paradox ” . Furthermore, some of them wholly refute the being of any Productivity Paradox in the first topographic point ( ( Dedrick & A ; Kraemer, 2001 ) ; ( D.Pilat, 2004 ) ) . A common yarn that connects most of the literature from 1990 ‘s to early 2000 ‘s is the fact that most of them talk about the effects of Information and Communication Technology on productiveness and growing in developing/industrialised states. It has been highlighted that Information and communicating engineerings ( ICTs ) carry a great potency of making development chances. The Human Development Report of 2001 was focused on doing usage of new engineerings for Human Development and recognised Information and Communication Technology as tool for economic development.

Michelle Fong has given an thorough history of how ICT ‘s are utile at different degrees in his research work.Starting at the house degree, ICTs can “ ease communications and coordination of procedures within a house or between houses in a supply concatenation such as through e-collaboration ” ( Fong, 2009, p. 3707 ) . ICT ‘s besides assistance in the determination devising procedures for directors by organizing information in a better and faster manner. This consequences in “ scale economic systems, cost-savings, increased productiveness, and improved fight ” . Further he says that at industry degree, ICTs can “ better the operation or administration of market ” ( Fong, 2009, p. 3707 ) . At the social-economic degree, ICTs can better life criterions, health care and instruction services, and “ create economic chances for any underprivileged population groups ” ( Fong, 2009, p. 3707 ) .The aggregative effects of ICT are finally reflected at the national degree in better productiveness, economic growing and development ( Fong, 2009, p. 3707 ) . It is obvious that with such economic system broad effects, the relation between Information and Communication Technologies and economic development has received important attending by economic experts, policy shapers, international administrations and research workers ( Mitchell & A ; Gillis, 2002 ) .However, it is highly surprising that here have been really limited resources in the literature and really bare research every bit far as developing states are concerned ( Kamel, et al. , 2009 ) . In some surveies, which did see developing states, it has been apparent that the returns to Information and Communication Technologies in developed states is significant and positive, but non in developing states ( ( Heshmati & A ; Yang, 2006 ) ; ( Nasab & A ; Aghaei, 2009 ) ) .A Cross state survey by Dewan and Kraemer for the period of 1985-1993, which focussed on 36 states across different continents established a positive correlativity between Information and Communication Technology and economic growing for developed states but found no grounds of such a relation for the development states ( Dewan & A ; Kraemer, 2000 ) . A survey by International Monetary Fund ( IMF ) on some of the Asiatic development states around the 1990s shows that bulk of them experienced worsening growing rates ( Lee & A ; Khatri, 2003 ) . It has been observed that relatively low degrees of investing in ICT and deficiency of complementary substructure in developing states has been the ground behind these low growing rates ( Nasab & A ; Aghaei, 2009 ) .In one of the policy recommendation brief by the United Nations University it has been emphasized that “ Developing states can no longer rely on low-priced fabrication to procure economic development ” ( Clarke, 2003 ) . After the recent groundss of the victory of developed states like the United States and many OECD states it is a widely accepted fact that developing states seeking to catch up in the procedure of development can derive a competitory advantage merely if they embrace technological and organizational inventions to heighten productiveness and growing rates ( Clarke, 2003 ) . The United Nations Millennium Development Goals ( MDGs ) recognize the potencies of ICT for development calls “ to develop a planetary partnership for development and, in cooperation with the private sector, make available the benefits of new engineerings – particularly information and communicating engineerings. ” ( Braund, et al. , 2006 ) . In fact it is being said that every bit compared to old engineerings, ICTs develop faster while cut downing costs at the same clip, a characteristic that can be extremely relevant and utile for developing economic systems ( Jurich, 2000 ) .However, Mina Baliamoune-Lutz, is sceptic about the consequence of Information and Communication Technology on human development in developing states in her research paper “ An analysis of the determiners and effects of ICT diffusion in developing states ” ( Baliamoune-Lutz, 2003 ) . Her agnosticism arises from the fact that there has been really small empirical research on the nexus between Information and Communication Technology and economic development in the context of developing states. She besides doubts that developing states will hold the same experiences as the developed states with Information and Communication Technology revolution. She steadfastly states that this ambiguity about the relation between ICT usage and economic growing in developing states needs to be addressed with relevant empirical research ( Baliamoune-Lutz, 2003 ) .

As many have discussed about the positive effects of the transformational capableness of Information and Communication Technology in the context of economic development, some have besides highlighted the hazard of “ Digital Divide ” if underdeveloped states are unable to work this transformational capableness of Information and Communication Technology. Digital Divide is “ uneven diffusion of engineering and inequality in entree to engineerings with important societal, economic and political effects ” ( Hameed, 2007 ) ( See Appendix C ) . However, W.L.Fong remains optimistic on the issue of Digital divide in his recent survey in the twelvemonth 2009. He says that, “ Developing states are by and large latecomers to the ICT revolution, but if they can emulate industrialised states in their acceptance of ICTs, they will be afforded the same technological chances ” ( Fong, 2009 ) . He believes that the broad spread between developing and developed states can be narrowed if developing states seize the chance to jump toad into the following coevals Information and Communication engineering. He farther adds that Information and Communication Technologies have a great potency to cut down poorness and contribute to overall homo development which can assist developing states to excel even the most developed and industrialized states. However he admits that there is really small empirical research to back up the thought that leapfrogging can quickly assist developing states achieve economic development ( Fong, 2009 ) .

As discussed in the preceding paragraphs, there has been really small research on whether ICT can assist the developing states to catch up with the developed states in the procedure of development. Nevertheless, developing states have drastically amplified their investings in Information and Communication Technology. For illustration in the twelvemonth 1998, statistics show that China had less than 10 million Personal Computers and non more than 1 million Internet users ( Dedrick & A ; Kraemer, 1998 ) .Whereas, harmonizing to Forbes ( Forbes, 2011 ) and Internet World Stats ( Internet World Stats, 2010 ) , today China is the universe ‘s largest market for Personal computers. It has surpassed the United States which was earlier the largest market for Personal Computers. China has the maximal figure of Internet users every bit good. Furthermore, harmonizing to a research by Heeks and Kenny the disbursement on Information and Communication Technology doubled towards the terminal of the twentieth century in developing states as compared to OECD states ( Heeks & A ; Kenny, 2002 ) . However, unlike the developed states, developing states face the immense challenge of equilibrating between supplying basic demands and puting in Information and Communication Technology. It is being questioned if it is wise to deviate resources towards Information and Communication Technology when there are more basic demands to be fulfilled ( Kamel, et al. , 2009 ) . Therefore, there is an increasing demand to reevaluate the nexus between ICT and economic development from a developing state position.

As per the research done for this thesis, there have non been many important empirical surveies on this subject specially after the early 2000 ‘s, except the survey by Dewan, S. and K. L. Kraemer ‘s “ Information Technology and Productivity: Evidence from Country-Level Data ” in 2000 across developed and developing states, Matti Pohjola ‘s “ Information Technology and Economic Growth: A Cross-Country Analysis ” in 2000 and Lee & A ; Khatri ‘s “ Information Technology and Productivity Growth in Asia ” in 2003.Moreover, these surveies have discussed about the tendencies merely up to the terminal of the twentieth century. None of them have entirely focussed on the experiences of developing states after these states have really started puting to a great extent on Information and Communication Technology. Furthermore, all of them have concluded that there is no positive relation between ICT ‘s and Economic growing. There has been a long spread of about a decennary, station 2000 during which non many have written about the controversial issue of “ productiveness paradox ” or in other words payoff ‘s from ICT investings, which forms that footing of the motive behind this thesis.This paper will chiefly seek to analyze the correlativity between Information and Communication Technology and Economic growing, which will be accomplished by analyzing the instance of India. Precisely, it will measure the impact of ICT investing on GDP growing of India. India ‘s instance is interesting because it is one of the really few developing states which have stood up among the developed states every bit far as Information and Communication Technology is concerned in malice of its low income and development degrees. This thesis will further seek to happen out if there exists a growing paradox merely like the productiveness paradox in the instance of U.S, for India. This will be done by analyzing the effects of ICT investing on existent GDP over a clip span of 11 old ages. With the illustration of India, this survey will seek to reply some broader inquiries like, are ICT ‘s an instrumental tool for developing economic systems in the ‘catch up ‘ procedure?

Aim, Contribution and Scope of Research


Based on the treatments above, the general purpose of the thesis is to analyze the importance of ICT ‘s in the procedure of economic development for the underdeveloped economic systems. It tries to revisit the research subject of ICT ‘s for development with a new position and most recent informations available. It besides aims to lend to the easy turning but still thin organic structure of literature available on impacts of ICT ‘s on economic growing of a underdeveloped state.

The specific purpose of this thesis is to prove the correlativity between ICT investing and economic growing in footings of existent GDP for the state of India.

Alternatively, the aim of the thesis is to analyze the productiveness maps and analyse the impact of assorted inputs to the economic growing of a state. Further, this analysis will be specifically used to detect the function of ICT in economic growing of India. A subsidary aim of this survey is to happen out if there is a similarity or contradiction in the experiences of developed and developing states.


This paper contributes new findings to bing literature in development and engineering surveies environing the issue of productiveness paradox. However, unlike earlier surveies it tries to seek for a different signifier of productiveness paradox relevant to the developing states merely. Many international administrations, authoritiess, assistance bureaus and NGO ‘s have been advancing the thought of “ Information and Communication Technology for development ” , ( Harris, 2004 ) .A United Nations Publication quotes that “ Technology per Se does non work out societal jobs. But the handiness and usage of information and communicating engineerings are a pre-requisite for economic and societal development in our universe ” ( Castells, 1999 ) . With the illustration of success narratives of many of the developed states, developing states are besides following the suit and puting in Information and Communication Technologies. But are these investings holding any existent impacts on the growing statistics? Are the developing states confronting any paradox like the United States? This survey will seek to lend to the replies for these inquiries. Furthermore, this sort of survey non merely fulfils the research demand for appropriate policy steps of the development states, but it could besides turn out to be worthwhile for the least developed states which are traping their hopes of economic development through investings in Information and Communication Technology. In the last decennary, there have been many political, societal, economic and technological alterations like globalization, more unfastened markets, emerging in-between categories in developing states, new connectivity platforms like 3G, and so on. Therefore from a research position this survey will update the available information base on the relation between ICT and development but it will differ from the earlier surveies in the sense that the relation is now tested under a new set of conditions.


The range of this thesis will be limited to analyzing the function of ICT ‘s in the development of developing economic systems. Due to clip and informations restrictions, the survey will non include all the developing economic systems for analysis. It will concentrate on merely one state as a placeholder for the full class. The survey will utilize qualitative and quantitative informations from available and accessible online databases, diaries, books and web sites. It will try to construct a simple empirical theoretical account and analyze the correlativity between two variables ( ICT investing and GDP ) . The analysis will be strictly based on the facts and figures presented in the thesis. Finally, this survey will be conducted within the bounds of schoolroom cognition of the writer in the country of development surveies, economic sciences and statistics.

Structure of Thesis

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