The Indian economy is facing an unprecedented slowdown. Several sectors of the economy are undergoing severe financial stress. The Indian telecom industry is marred with mounting debt, growing losses and unsustainable government levies. While low usage charges in the last few years have increased mobile penetration among Indians, low revenues and lack of government support to ailing telcos pose a serious threat to the very existence of the dire number of telcos surviving in the industry.
As of September 2019, India’s rural subscriber base stood at 517.29 million, whereas urban subscriber base stood at 677.95 million. Its teledensity i.e. number of telephone connections for every hundred individuals living within an area, in rural areas stood at 57.59, while its teledensity in urban areas stood at 160.63.
With a subscriber base of about 1.2 billion, the government should actively seek to foster competition in this sector so that while consumers benefit from new-age technologies, they do not have to pay exorbitant prices in accessing the same. It should create a conducive business environment where the industry can embrace new technologies such as 5G and make them available to improve the lives of the people.
The success of the country’s ambitious National Digital Communications Policy-2018 depends on the vibrancy of India’s telecom sector. The policy, among other things, envisages universal broadband connectivity, promote investment of USD 100 billion in the digital communication sector and create four million jobs.
World Trade Center Mumbai proposes the following steps to address the stress in the industry:
1. Reduce statutory levies such as spectrum usage charges and license fees
2. Reduce the base price of the spectrum to be auctioned for the rollout of 5G
3. Provide one-time restructuring of loans of the telecom industry
In order to boost private investment, the government should take steps towards rationalizing the income tax and GST rates as these will spur consumption, thereby creating demand which will kick start investment. Tax rationalization will enhance the tax base by reducing tax evasion, thereby increasing tax collection. As individuals and SMEs will be at the receiving end of these tax cuts, a revival in demand will go a long way in generating growth, employment and exports.
Further, it has often been argued that the existing labour laws have been working to the detriment of employees as employers tend to keep the size of their firms small by hiring fewer workers, and more so on contractual basis, thereby keeping them bereft of the benefits that regular employees get. However, the small size of the majority of firms in India restricts them from reaping the benefits of economies of scale and becoming internationally competitive to enjoy gains from trade. Therefore, reforms in labour laws, such as through the Labour Codes, that create a win-win for employers as well as employees, are direly needed for India in order to create labour-intensive jobs and encash our demographic dividend.