This paper examines the phenomenal growth of Information Technology software and services industry in India, the challenges ahead and the policies framed. It concludes by suggesting areas of improvement. The IT software and services industry is service rather than product oriented, heavily export oriented, and is largely managed by professional and entrepreneurial managements. The industry grossed annual revenue of $8.26 billion during 2000-01. Although the industry has grown in spectacular fashion, sustaining this performance will pose number of challenges. The key challenges are, moving towards a product-oriented industry, more R&D investment and moving up the value chain. Disconnect between domestic and export markets is another major challenge. The Indian government has taken up these challenges along with the industry and formulated policies to face the challenges. In the end, the IT industry with its new business organizational form and entrepreneurship excellence is likely to thrust India into the league of developed nations
