Tuesday, August 1, 2000
India has been successful in building up a strong economic foundation for sustained growth based on strong macro-economic fundamentals, decontrol and delicensing; firm control on external debt exposure; financial sector reforms and the liberal and attractive regime for foreign direct investment.
Having successfully completed the first phase of economic reforms, the country is now poised to launch the second generation reforms, including fiscal management, disinvestments, labor market reforms and reforms in the financial sector.
In the telecom sector, for example, the migration policy for existing telecom operators from a fixed license fee regime to revenue sharing — despite existing legal and contractual commitments and the tremendous political criticism on the eve of national elections — has been one such measure which may have few parallels elsewhere. Our rate of growth in the telecom sector in the recent past has been a healthy 23 to 24 percent. However, with a population of about a billion and an anticipated demand explosion with economic growth, the opportunities in terms of absolute numbers are extremely attractive, in basic and value-added services as well as in manufacturing of equipment. We have kept a very modest target of raising the teledensity from the present 2.7 per hundred to 7 by 2005 and 15 by 2010 — but even that would envisage an investment of approximately $37 billion and $69 billion, respectively. And the private sector will be an important partner in this investment, and obviously, it will be a very attractive and remunerative investment opportunity.
Bandwidth Bottleneck
The government is conscious that availability of adequate bandwidth is critical for the development of an IT sector in the country. A committee consisting of eminent IT and telecom industry personalities is being set up to advise the Department of Telecommunications on the steps to be taken to ensure that the bandwidth is available on demand.
Internet Service Providers are now permitted to take bandwidth directly from the foreign satellites that are coordinated over India, for setting up of international gateways for the Internet. Customs duty on ATM switch, frame relay switch and routers has been reduced from 25 percent to 5 percent for ISPs.
Under the national long distance policy — to be announced soon — infrastructure providers will be encouraged to provide assets such as dark fibers, right of way, duct space and also end-to-end bandwidth. VSNL and DTS will provide bandwidth in a time-bound manner and ensure that there is no shortage of international bandwidth.
Convergence
The government has set up a high level group on telecom and IT convergence, which is looking into some of the subsisting problems of telecom service providers, convergence of telecom, IT and media, and promotion of Internet and e-commerce. A new comprehensive statute to replace the existing Indian Telegraph Act is being finalized. The TRAI (Telecom Regulatory Authority of India) Act has already been amended to provide for a strong and an independent regulatory framework, with a separate Appellate Tribunal headed by a retired Judge of the Supreme Court and appeals from there would now go direct to the Supreme Court.
There are several incentives available for fresh investment in telecom sector. Ease in procedures in licensing and automatic approvals in several categories of foreign investments — incentives like tax holidays, amortization of license fee, enhanced limit of external commercial borrowings, concessional import duties, full repatriability of dividend income and capital invested in the telecom sector are some of the benefits. I can assure you that incentives offered in India today compare with the best in the world.
The national long distance is being opened up for investment by the private sector and the policy will be announced shortly. There are immense opportunities in India for ISPs, service providers and call centers. The existing centers in India with US bases are doing extremely well and the complementarity of skills with benefits of economic costs and differential time zones provide immense potential for the proliferation of these services in India. India already has a number of US multinationals in the telecom sector. We are keen to see many more.
The foundation has been laid, the boundaries marked. It’s time to nurture and help individuality to flourish. I hope we will secure a better tomorrow for the US, for India and for the entire human race.
Adapted from the keynote address by Communications Minister Ram Vilas Paswan at the 25th Annual Meeting of the U.S.-India Business Council in San Francisco on June 13, 2000.
