Tamil Nadu's `success story' in the Information Technology (IT) Industry in the last five years sounds quite amazing, but the State needs to dovetail this sectoral growth into a larger strategy of economic development.

Though IT could positively contribute to all segments of the economy, ``it is only one piece of the puzzle'', a study by the Harvard University's `Harvard Institute for International Development' (HIID) on the IT industry in Tamil Nadu has said.

``It is vital that the Tamil Nadu Government drafts a comprehensive blueprint in which it articulates its strategy for economic development, as Singapore did back in 1991'', the paper by Mr.Nirupam Bajpai and Mr.Navi Radjou says. Such an economic masterplan should, however, emphasise the role of IT as the `lynchpin' of sustainable economic growth.

The collection of papers, which have analysed, in detail, the IT industry in Tamil Nadu in the context of larger national and international trends and offering valuable insights to policy makers was tabled in the Tamil Nadu Assembly recently.

Looking into IT policies of countries like Ireland and Israel, which ``boast of a successful track record'' in IT development, the authors taking a critical look at the current state of Tamil Nadu's IT industry, have made some crucial observations. These include the following:

While Tamil Nadu should maintain its ``export-oriented manufacturing production'' as a priority area, it would need to lay larger focus on capital and knowledge-intensive service industries such as IT.

Besides encouraging all State departments from Agriculture to Finance to Industry, to become efficient IT users and ``active promoters'' of the local IT industry, the paper notes that Tamil Nadu needs to evolve from being a ``low-cost IT supplier to much more of a value-added service provider''.

Stating that achieving global competitiveness ``begins with building a strong local base'', the Tamil Nadu IT industry needs to look at concepts like `stock options' to its employees as Israel has done, and focus on the domestic market to develop experience and capabilities before venturing out globally.

"Current IT policies in Tamil Nadu mostly support supply-side; however, it is equally important to bolster demand side'', the paper says and suggests that Tamil Nadu also avoid the `pitfalls' of States like Karnataka, where advent of IT as in Bangalore, has not improved the State's overall economy.

With worldwide revenues from e-commerce activities put at a staggering US dollars 3.2 trillion by 2003, the authors say that the Tamil Nadu IT industry, "by intelligently leveraging its inherent strengths, can secure a decent share of the lucrative Internet software market and eventually emerge as an e-commerce leader''.

Making out a strong case for creating local demand for IT products and services apart from IT export strategies, the paper says that over-emphasis on exports leaves the local IT market underdeveloped. This would not sustain the industry in the long run. Annual PC sales in India currently amount to no more than 1 million units, less than 1 per cent of the global market, it says, adding, at 1.10 per cent of the GDP, the country's IT spending is also amongst the lowest in Asia.

Adverting to the 80 million-strong Tamil-speaking population worldwide, the authors argue that such a large market provides local IT firms here the major advantage of economies of scale. Two enablers - a standardized Tamil font and the Internet - could accelerate IT diffusion in the State.

Suggesting that the Tamil Nadu Government encourage local IT firms to develop software in Tamil and produce online content in Tamil as well, the paper observes that this process could be accelerated by establishing links with overseas Tamil scholars, like U.S.Berkeley's George Hart.

Embarking on a comprehensive computerisation programme of Government departments that "aims to provide a wide range of services to its citizens'', application of IT in various industries in Tamil Nadu, exploiting the opportunities resulting from privatisation of Indian PSUs, developing online advertising content for the Internet and tapping the online education market are among the initiatives mooted to spur local demand for IT.

However, the major constraints to be overcome are seen in the infrastructure side. Another paper in that series by Mr.Nirupam Bajpai and Ms.Anupama Dokeniya, says that while "Tamil Nadu rates better than other Indian States, the State is required to upgrade the quality of its existing infrastructure and add to the existing capacity in order to attain and sustain higher levels of SDP growth''.

In the area of power, the Harvard study underscores that the reform of the State Electricity Board is critical. With respect to telecommunications, despite VSNL providing 24-hours-a- day service, software companies complain  "that often the local loop goes down resulting in the inability to uplink data streams''.

While placing on record that the Tamil Nadu Government has already taken "significant measures'' to redress these problems, the authors say that with the ruling party here (DMK) being part of the coalition at the Centre, the Government   "can influence the federal Government's IT policy to do much more to spur growth in the IT industry''.