This research looks at the enormous changes that have occurred in the IT sector because of state policy liberalization and subsequent globalization. Import substitution has helped indigenous IT firms to improve their technical skills over time, but globalization poses a threat to their very survival by jeopardizing their technological capabilities, which have been painstakingly created because of import substitution. Even if Indian IT businesses appear to be adjusting to the changing environment, a renewed focus on local application development for the domestic market, as well as a drive for IT diffusion rather than just production, would be essential to ensure the industry's sustainability. The 1990s' economic and policy climate, advises against blanket solutions but stresses the importance of having regulatory mechanisms in place to secure maximum value from information technology while also keeping up with the industry's rapid technological shifts.