Knowledge-Based Industry in India

Knowledge-Based Industry in India

This article deals with the ‘Knowledge-Based Industry in India.’ This is part of our series on ‘Geography’, which is an important pillar of the GS-1 syllabus. For more articles, you can click here.


  • The advancement in information technology has profoundly influenced the country’s economy. The Information Technology (IT) revolution opened up new economic and social transformation possibilities.
  • The Indian software industry has emerged as one of the fastest-growing sectors in the economy.  
  • A majority of the multinational companies operating in the area of information technology have either software development centres or research development centres in India.  
Knowledge-Based Industry in India


Knowledge-Economy is primarily based on intangible assets such as the value of its workers and IPR. These sectors include Space, Pharma, IT, e-learning etc. 

India’s competitors in Knowledge-Economy

China China is the most formidable competitor to Indian companies in the knowledge economy.
ASEAN Nations ASEAN countries such as the Philippines, Vietnam, Indonesia etc., have graduated with command over the English language, thus encroaching upon the Indian market.

Indian Knowledge-Based Economy

1. Space

  • India has been able to develop Space Sector due to the support given by the Indian government. But, apart from ISRO, India has not been able to produce a world-class space company (such as SpaceX of the USA)

2. BPO

  • Indian BPO sector is well developed and is a major contributor to Forex earnings of India.

3. Electronics

  • The Indian government has not supported developing the electronics sector in the past. Hence, India’s electronics sector was not able to develop. 
  • The present government wants to develop the Electronics sector in India and has started schemes like Production Linked Incentive (PLI) scheme. Companies such as Samsung and Apple have started manufacturing their products in India. 

4. Pharma

  • India is known as the ‘pharmacy of the developing world’ and the 11th largest drug producer globally. But private companies are not spending on R&D and hence not able to produce novel and revolutionary drugs, for which Indians are dependent on foreign companies such as Pfizer, Novartis etc. 

IT Industry in Bangalore. Why? 

Bangalore is known as the silicon valley of India.  

1. Historical perspective

  • In the 1950-70s, Bharat Electronics Limited, IISC, National Defence lab, HAL, and ISRO were set up here. It created backward & forward linkages in the field of electronics.  

2. Well Connected

  • The city is well connected by road, railways & air.

3. Skilled Labour

  • IISC & a large number of institutions around Bangalore provide a large number of professionals to work in the software industry.

4. Progressive Government

  • The government’s policies helped, like providing land at reasonable rates, tax concessions etc. 

5. Pleasant climate

  • A pleasant climate is a perk for professionals, especially in Tropical countries like India. It is an ideal place to living   

But Bangalore has not been able to cope with the rapid increase in population. Due to jammed roads & increased pollution, other cities came up to compete like Pune, Gurgaon, Noida etc.

Challenges faced by India’s IT Sector

1. Loss of Market  Access

Indian IT Industry is losing market access 

  • USA: Due to the “Buy American, Hire American” Policy & H1B Visa restrictions 
  • EU  has also introduced Data Protection and Privacy Rules (DPPR) that effectively prevent Indian companies from providing services from India, while the US has been given safe harbour status.  

2. Competition from new entrants

  • Indian service companies are now challenged by startups like Luxoft, which are using cloud-based technology, and new digital entrants from Eastern Europe and Latin American countries. 

3. Domestic challenges

There are also some domestic challenges like 

  • shortage of skilled talent
  • underdeveloped infrastructure in Tier 2 & 3 cities
  • Some restrictive regulations for product startups. 

Meanwhile, the  Government of India’s rapid adoption of technologies as a platform for delivering government-to-government and government-to-citizen services is a tremendous push factor for the domestic ITBPM market.

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