INDIA’S FAST GROWING TELECOM SECTOR

New Delhi, 21 November 2005

India’s Telecommunication sector has been growing at a rate of about 20 per cent per annum for the past few years, according to an American official estimate. The sector is a major recipient of the US investment.

The tele-density of the sector’s growth has increased from 1.94 per cent in 1999 to 7.02 per cent in 2004.  India has targeted to increase the tele-density to 20 by 2008. The country’s wireless market is by far the fastest growing market in the world. The number of cellular subscribers has increased from one million in 1998 to 41 million in 2004.

India is looking forward to achieve an annual growth rate of 13 per cent in cable TV subscribers, 18 per cent in TV owners, 27 per cent in PC (Personal Computer) penetration,, 28 per cent in cell phones, 30 per cent in telephones on 58 per cent internet subscribers in the next four years.

The proportion of households moving towards richer and well to do category is going up in the country, according to an analysis by the US department of Commerce. It finds that there exists a huge untapped potential.

The Union Government is now seeking foreign investment in manufacturing telecom equipment and handset. Approximately 16 million handsets were sold in India in 2003 and the estimated number for 2004 is 30 million.  In order to provide telecom services to 200 million telephone users by 2007, 40 million internet users by 2010, and 20 million broad band users by 2010, an investment of more than US$20 billion is needed. Most of these investments are expected to come from foreign investment source.

Some of the key changes include increase in foreign ownership limit, reduction of regulatory charges, moving to unlifted licensing and spectrum policy, bringing about comprehensive broad band policy and revamping of national telecom policy.

India’s energy sector has been an important destination for US investment.  The sector offers for exploitation a vast untapped potential to investors in hydro-electricity, oil and natural gas and coal.  Although several U.S. companies have been looking at the Indian energy market closely, progress has so far been limited.

With the introduction of Central Electricity Act 2003, the Government of India has now liberalized the power sector. Private sector participation is now allowed in generation, distribution and transmission.  Considering the vast present and projected demand-supply gap, there is tremendous potential for economic cooperation between the two countries in this area.

In order to promote bilateral trade and investment in the knowledge-based industries, the US India Business Council (USIBC), along with FICCI, has launched a Knowledge Trade Initiative (KTI).  The KTI is a bilateral forum between India and the U.S. to discuss key issues affecting the trade of knowledge-based products and services between the two countries. The KTI aims at solidifying the Indo-US leadership in the knowledge economy by harmonizing bilateral positions on key issues affecting the knowledge trade.

The US investor community is today increasingly sharing confidence in the future of the Indian economy. The growing synergy between the two countries in the technology sectors and mutually shared respect for democracy, rule of law and well-established business practices make the two countries natural business partners. ---INFA