ICT and Employment in India: An Analysis of Organized Sector

Abstract

How technology affects employment has long been debated. In this regard, the recent debate revolves around the impact of Information and Communication Technology (a form of new technology) on productivity and employment. ICT perceived as GPT (general-purpose technology) like steam engines or electricity in the past ushered the world into a new techno-economic paradigm, i.e., it is hard to imagine an economic activity without using it, directly or indirectly. Eventually, ICT investment as a percentage of non-ICT investment (known as ICT intensity) increased significantly over the years in industries across all sectors. How increased ICT intensity affected employment is exactly the question taken up through the paper. To find the answer, on the basis of ICT intensity, industries belonging to the organized sector are categorized into ICT-producing (ICTPS), ICT-using (ICTUS) and non-ICT-using (NICTUS) sectors, with their further division into the manufacturing and the services sector. Empirically, it is found that only the ICTPS witnessed high employment elasticity (EE) with increased ICT intensity since 2000, something found true in both of its segments manufacturing and services sectors, and in both periods Period I (2000–2005) and Period II (2005–2010). In contrast, in ICTUS, EE declined with increased ICT intensity. The trend was found true in both of its constituents. Finally, within NICTUS, in both periods, in both sectors, employment elasticity increased with ICT intensity. In conclusion, for the country as a whole, EE has increased, driven by the services sector, with increased ICT intensity. So, it can be ascertained that new technology in the form of ICT has resulted in a positive employment impact in the services sector, but not in the secondary sectors.