This thesis goes through basic principles of industrial policy in developing countries and analyses examples of recent industrial policies in BRIC countries (Brazil, Russia, India and China) in the last two decades. The analysis shows the coexistence of unsuccessful and fruitful stories of industrial policy implementation. In the text, I focus especially on the last two decades. I recognize that industrial policy can have a positive impact on economy in some cases, but on the other hand, government failures are frequent and they can result in deep distortions of economic systems and waste of resources. Since 90s', pro-active approach positively contributed to the growth primarily in China and India -- although the progress of these two countries differs substantially. These two countries were (and still are) relatively poorer than Russia and Brazil. Typically, industrial policy in BRIC countries broadly overrides problems of corporate governance, corrupt practices and bureaucratic burdens.

India's meteoric economic growth rate has been a subject of much discussion since the country began its economic liberalization in the early 1990s. The software segment, in particular, is growing at a rate of 48.5 percent. The conventional wisdom argues that market forces have driven India's software's success, and more broadly, information technology. This thesis marshals evidence for the role of the state in interaction with the software sector. More specifically, by discussing India's broad-scale import substitution industrialization efforts from the 1950s to 1991 and its transition to a more open economic structure, as well as more industry specific policies within a theoretical context, this work attempts to identify the key driving forces and impact of government policy. Most works that have attempted to assess such state efforts have done so in a casual fashion, without linking the actions to carefully specified rationales for state intervention. This thesis specifies four plausible rationales for government intervention: market failures, government goals in promoting a domestic industry for national security and the state role in international negotiations that might affect specific sectors, intervention driven by rent seeking behavior on the part of private-sector actors, and state intervention to address previous government policies in a particular market that may be seen as being inadequate or failures. It then empirically assesses the support for each of these claims in light of the evolution of the Indian software industry since its inception. In so doing, this work allows one to gauge the significant contributions of the state within a clear context of possible state roles. It also helps in understanding the software industry’s current challenges, and possible future role of the state in the industry.