Cellular mobile in India competition and policy

Abstract

Telecommunications in India has been one of the success stories of economic reforms that increased GDP growth to 9% from the earlier "Hindu rate of growth" of 3%. The number of telephone connections per one hundred people, or teledensity, has increased from a low of 0.81 in 1994 to 64.34 at the end of 20102. By most standards this is a creditable achievement. The growth in telecommunication services has also been spectacular clocking some of the fastest growth rates in the world. A closer look at the sector though reveals a less rosy picture. It has become fashionable to compare China and India across most parameters of economic growth and well being. Here, as with other parameters, India does not compare favourably. In 2009 India's mobile teledensity was 43.48 while that of China's was 55.973. India also compares unfavourably with other Asian neighbours.4 It could of course be argued that given her late start and current robust growth rates she will catch up, sooner rather than later. Yet, there are other misgivings. One is the sorry state of rural teledensity5 and another is the lack of broadband penetration6. Further, the telecommunications sector seems to get embroiled in political problems from time to time. Currently, the Controller and Auditor General of India (CAG) has suggested that in the last round of allocation of 2G spectrum using administrative procedures rather than an auction has led to substantial loss of revenue to the government. One estimate7 has pegged it at 176645 crores8 (1.76 trillion Rupees). Regardless of the truth of the charge this event has caused some turmoil in the telecommunications sector leading to the resignation of the telecommunications minister and calls for cancellation of licenses. Clearly events of this kind should affect the health of this sector. However, nothing much seems to have happened. It is as if the key drivers of this sector are so strong that minor hiccups don't make a dent. The other possibility is that if such events had been avoided then telecommunications growth would have been even higher and conditions healthier.