Are we gambling too much on the Knowledge Industry? Manmohan Singh recently announced that the eleventh five year plan would be centered around increasing the infrastructure (read institutes) for a knowledge based industry. That translates into more IITs and more IIMs with the generic mix of IISCs and IIITs thrown in as well. Effectively graduation and post graduation are been given more focus here, aimed at churning out more skilled labour and management students for corporates to come to the nation and setup bases; cost effective and efficient.
But, is this not increasing our dependence on the IT sector? Whenever the INR rises against the USD, the Indian IT sector plummets by a few percent ... its obvious, direct PAT is taking a hit here, for the entire industry. Stocks of all the big IT companies see a dip. When the Rupee saw a 17-month low, the IT sector saw a cumulative 0.86% rise, the big firms' stock rose by as high as 2%. So whenever I want my INR goes down, my IT sector does well ... meaning more business ... meaning more exports ... meaning more employment ... meaning higher cumulative disposable incomes ... meaning higher GDP ... meaning economic development ... meaning more imports (assumption here, but generally higher disposable incomes lead to higher imports - correct me if I am wrong) ... meaning INR rises back. Would it be not great if the finance minister could use other industries for balancing the economy?