Don’t Wait For Distress Call

The Indian Express     25th November 2021     Save    
QEP Pocket Notes

Context: The benefits of digitalisation could have been much larger and more widespread had telecom policy been more predictable and less erratic.

Economic reforms in India

  • 1991 reform, the most charismatic: Its catapulted India from being a socialist economy with a heart but no trickle-down, to a market-oriented economy with a mind but also very little trickle-down. 
  • Pre-1991 period: Principal modes of redistribution were taxation and public sector operations. 
  • Post-1991 period: It has been a combination of taxation, technology, smartphones and associated DBT.

Reforms and revolutions in telecom sector

  • Positive growth dividend: Every 10% increase in investment in telecom leads to a 3.2% increase in GDP. 
  • Mobile phone has become a means for sophisticated financial integration, as shown by the expanding usage of pre-paid payment instruments and mobile banking. 
  • Payments through Aadhaar-linked bank accounts have increased efficiency and reduced leakages.
  • Benefits of digitalisation could have been much larger and more widespread had telecom policy been more predictable and less erratic. 

Issues associated with Telecom Sector: 

  • 2G scam and misallocation of licences in early days of liberalisation;
  • Inflated definition of Adjusted Gross Revenue; 
  • Conversion of fixed to mobile licences;
  • Avoidable Vodafone retrospective tax demand, 
  • Dissolution of the first regulator in 1999, among many others, make the dubious list quite lengthy;
  • Intense and debilitating price war;
  • Unreasonable definition of AGR;
  • Extractive spectrum auction regime; 
  • March of technology that destroyed comfortable revenue streams of operators;
  • Risk of a duopoly looming large.

Way Forward

  • Need to meet the large unmet demand for banking services.
  • Telecom relief package: To supports proposals that have been repeatedly presented to the government by the regulator, industry associations and think tanks. 
  • Provide an immediate relief on payment of licence fee and penalties due to the government.
  • Increased FDI limits: From licence tenure 20 years to 30 years, removed charges on spectrum-sharing and proposed timelines for spectrum auctions. 
    • It will have a positive short-term impact and perhaps safeguard competition in the future.

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QEP Pocket Notes