Telecom Industry In India Crosses A Milestone

With 1.2 billion subscribers, India is currently the second-largest telecom market in the world and has seen rapid expansion over the past years. The industry has increased primarily due to favourable regulatory conditions, low prices, increased accessibility, and the introduction of Mobile Number Portability (MNP), expanding 3G and 4G coverage and changing subscriber consumption patterns. In 2020-2021 the telecom industry contributed 6% to India's Gross Domestic Product (GDP). The telecom sector is set to grow at a Compound Annual Growth Rate (CAGR) of 9.4% from 2020 to 2025. However, with a CAGR of 15.9% throughout the forecast period, the smartphone industry in India will have the fastest growth. By 2025, India's digital economy is anticipated to be worth $ 1 trillion.

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The market size of India in the telecom sector at the global level

The telecom sector in India is the third largest sector in terms of Foreign Direct Investment (FDI) inflows and accounts for 6.44% of all FDI inflows. It supports 2.2 Mn jobs directly and 1.8 Mn jobs indirectly. In the telecom industry, 100% FDI is currently permitted, of which 49% can be done through an automatic route, whereas beyond this, it needs to follow the government route. The amount of FDI in the telecom sector increased by 150%, from $ 8.32 Bn to $ 20.72 Bn between 2014 and 2021. Many telecom services, including telecom infrastructure providers like Basic Cellular, United Access Services and Commercial V-Sat, have invested in the telecom industry. 

Growth in India’s Telecom Industry

The subsectors of the telecommunication sector include infrastructure, equipment, Mobile Virtual Network Operators (MNVO), white space spectrum, 5G, telephone service providers, and broadband. The Indian telecom tower market has expanded dramatically by 65% during the past seven years. It is predicted that 5G technology will boost the Indian economy by $ 450 Bn between 2023 and 2040. According to the Global System for Mobile Communications (GSMA), there is an excellent opportunity for investment in this sector as India will have almost one billion installed smartphones by 2025 and 920 million unique mobile customers, including 88 million 5G connections. This will make India the second-largest smartphone market in the world, which will increase the manufacturing, advertisement, sales and production market in India.

It is estimated that over the next five years, a rise in mobile-phone penetration and a decline in data costs will add 500 million new internet users in India, creating opportunities for new businesses ranging from food delivery and e-commerce to providing online insurance. By 2025, India will need 22 million skilled workers for operating hardware, software-defined networks, computer data and manufacturing in the 5G-centric technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), robotics and cloud computing. The increase in daily subscriber base, along with employment generation and new business opportunities, attracts investment opportunities in this sector.

The 5G services in India are expected to go live by the end of 2022. This will allow the telecom industry to cross $ 133.33 Bn mark by 2023. A report by the technology consultant Techarc predicts that the technology will reach many cities and towns by 2023 and beyond. This will give the telecom industry a further boost. To begin with, the first phase of the rollout will witness 13 cities, including Ahmadabad, Delhi, Chennai, Chandigarh, Pune, Gurugram, Hyderabad, Jamnagar, Kolkata, Lucknow, Mumbai, Bengaluru, and Gandhinagar will get the 5G internet services. The government plans to make internet services accessible throughout the country, including urban and rural areas and make it affordable in the next two to three years. Currently, 59.48% of telecommunications connect rurally and 87.26% of the urban regions.

Government Initiatives and Achievements in the Sector

The government has accelerated reforms in the telecom industry and keeps moving ahead to give telecom firms room to expand.

  • Production Linked Incentive (PLI) scheme for telecom and networking products provides a financial incentive to boost domestic manufacturing and attract investments in the target segments of telecom and networking services. According to estimates, using the schemes will likely result in incremental production of around $ 30 Bn and roughly $ 25 Bn exports over the next five years. 
  • To speed up the growth of broadband internet services, the Prime Minister Wi-Fi Access Network Interface (PM-WANI) was launched in May 2022. It is a public Wi-Fi service offered nationwide through Public Data Offices (PDOs). It is accessible through 2,384 Wi-Fi hotspots at 100 train stations across 22 states. The government, in August 2022, has now launched a 5-P model of people-panchayat-public-private-partnership that will take the PM-WANI scheme to the country's hinterland. 
  • In June 2022, the Bharat Net Project for optical fibre cables was launched. It was implemented to provide broadband connectivity to India's gram panchayats. Of the 178,247 gram panchayats where it was laid, 161,870 are now ready for service. The total number of gram panchayats ready for service increased to 166,088 after 4,218 were connected via satellite media. By 2025 the government plans to cover the total number of gram panchayats and enable broadband connectivity there. 
  • Department of Telecommunication launched 'Tarang Sanchar', a web portal sharing information on mobile towers and Electromotive force (EMF) emission compliances. Consumers at home can get information about the towers working in a particular area. This saw over a 75% increase in internet coverage from 251 Mn users to 446 Mn in 2022.

The importance of the telecommunication industry is highlighted by the fact that it enables global communication. The relevance of this industry has increased significantly after the pandemic. Services offered by this industry are more frequently used since it allows for a continued virtual connection. The smartphone market will continue to increase as more people are expected to purchase them in the coming years. Given that government reforms have eliminated ambiguity and risks and established a stable investment environment, India's telecom sector is projected to receive investments totalling $ 25.2 Bn over the next two years. According to a Zenith Media report, India is the fastest-growing telecom advertising market, with an annual growth rate of 11% between 2020 and 2023. The Indian telecom companies, with the help of this, can expand their network and set up towers which will bring more subscribers and generate employment. It will allow a quicker transition to modern technology and increase rural telecom penetration. 

This has been co-authored by Bhakti Jain and Ishita Dhar.