“Recession Blue for Telecom Equipment Sector” [June 2012]

Presently, even though the scope is beyond imaginations, as India is second highest in subscriber’s base in world, the telecom equipment manufacturing sector in India is very negligible and because of recession affecting globally the sector needs due care and attention to make it into good shape- N K Goyal, President, CMAI Association of IndiaNeed for more initiatives The Indian telecommunications network is the second largest in the world and among the emerging economies of Asia. At present, it is the fastest growing market in the world, due to monthly addition of 5-8 million subscribers. As one of the key sectors, the Indian telecom sector is contributing tremendously towards the country’s resurgent economic growth.
This rapid growth can be attributed to various proactive and positive decisions of the Government and contribution by various public and private sector companies. The rapid pace in the telecom sector have been facilitated by liberal policies of the Government that provide easy market access for telecom services and equipment and a fair regulatory framework for offering telecom services to the Indian consumers. Today, the telecom equipment market in India is expected to grow to US$40 billion by the year 2020, up from current level of US$ 10 billion. Elaborating on the upcoming initiatives to be taken by the Government in promoting the telecom equipment manufacturing sector, NK Goyal, President at CMAI Association of India said, “The Government has already announced the policy of preferential purchase and is soon coming up with some incentives for R & D, semiconductors. The National Telecom Policy, National Electronic Policy, and Manufacturing Policy are in the pipeline.  Already 100 per cent FDI is permitted in telecom equipment manufacturing. These steps will help the sector in a big way. The Government is also coming up with a policy of clusters. It is doing lot of things but they are in the pipeline such as the cluster scheme, the IT policy, telecom policy, the R & D incentive scheme, all these are in the pipeline and they are enough for promoting the telecom equipment manufacturing sector”.
As far as telecom manufacturing sector is concerned, India had a wonderful base for wireline equipment manufacturing. The era of wireless growth came along with WTO/ITA regime, whereby duty free imports without any condition of specifications were permitted. Thus initially India was dependent on imports. The fact that telecom equipment has a global market and is manufactured keeping in view the international standards, India continued to import the same. Of late India has started manufacturing of wireless core equipment i.e. BTS/BSC/MSC also primarily for rural areas and energy efficient. India has also large base for cables, fibre, terminals, accessories and allied equipment, mobile handsets, tablets, smart phones etc.  Several EMS units have also come up in India. One of major mobile handset manufacturers has its largest manufacturing plant in Chennai. India is also known for several Indian brands of cell phones and several of them have announced plans for domestic manufacturing. One of the companies has recently announced technology tie up with Intel and launched the tablet phone. India has also launched Aakash, known as the world’s lowest cost tablet.
The Government is now concerned that if large scale imports of telecom equipment continue, then this may exceed the oil import bill. Hence domestic telecom equipment is receiving high priority by the Government.
As a President CMAI Association of India, Mr. Goyal feels, “India has a great potential for manufacturing in the telecom hardware sector. The Government of India is coming up with several new schemes and we are hopeful that very soon some initiatives like the policy on cluster, policy on manufacturing, the new IT policy being announced will give a major boost to the manufacturing sector”.
Mr. Goyal further points out various attempts the Government is initiating in order to take the sector forward.  There are lots that need to be done in the telecom sector for attaining manufacturing excellence. This is the reason the Government needs to come up with new schemes. This is a serious issue and the Government is concerned to take it forward. “Presently, the telecom equipment manufacturing sector in India is very negligible and because of recession affecting globally the sector is not in a good shape”, he adds. Mr. Goyal is also Vice Chairman of ITU APT India, Chairman Emeritus TEMA and Member Governing Council of Govt. of India’s Telecom Equipment & Services Export Promotion Council.
Commenting on the Government’s projection of creating 100 million jobs in the next 10 years, Mr. Goyal said, “It is possible. We have the capacity to create 100 million jobs. It is a good initiative. India is having the second largest base for mobile telecom industry in the world and our growth is the highest in the world”.
Mr. Goyal urges the national and international companies come to India for manufacturing telecom equipment and as CMAI, he would be glad to extend all assistance and help to see their venture as the most successful.
Positive policy initiativeThe Government is likely to insist on 100 per cent domestic sourcing for three major telecom projects of nearly Rs. 36,000 crore, comprising of Rs. 20,000 crore to lay optic fibre connecting all Panchayats in the country, the Rs. 15,000 crore to build an alternate Defence Communication Network and the Rs. 600 crore secure network between government departments across the country. Besides, the Government is also likely to decide that all future telecom projects funded from the Universal Service Obligation Fund must include 100 per cent indigenous equipment.
CMAI believes that all these steps would go a long way in promoting telecom equipment manufacturing and making hub for the same for global supplies.
Need to build synergy between States and Central GovernmentThe Government introduced National Manufacturing Plan in 2011 with the key goal being to give a boost to Indian manufacturing and increase its share in the national GDP to 25 per cent by 2025 and create 100 Million new jobs. This is laudable and a achievable goal. The industry supports this.
According to Mr. Goyal, “One of the impediments in development of manufacturing sector has been the absence of proper coordination and synergy between the Central and the State Governments”. The manufacturing policy and targets for manufacturing are set up by the Central Government, whereas the actual happening place is the States, who have to provide land and infrastructure like power, roads and utilities. The States also have to regulate the labour policies, housing for staff and federal/state tax management. It is only the States that can provide incentive or facilitate the manufacturing plans of any company.
Mr. Goyal observes that the Central Government’s initiative of “Take the plan to the States” will bring synergy between the States and the Central Government.

 Draft NTP Policy 2011The draft National Telecom Policy (NTP) 2011 containing inter-alia the following provisions to promote domestic telecom equipment manufacturing:• Promote the domestic production of telecommunication equipment to meet 80 per cent Indian telecom sector demand through domestic manufacturing with a value addition of 65 per cent by the year 2020.• Provide preferential market access for domestically manufactured telecommunication products including mobile devices, SIM cards with enhanced features etc. with special emphasis on Indian products for which IPRs reside in India to address strategic and security concerns of the Government, consistent with international commitments.
Further the draft NTP 2011 contains following provisions to incentivise telecom service providers to use indigenous products by encouraging:• Commitment to purchase indigenous products that are comparable in price and performance to imported products.• Commitment to participate in trials of newly created Indian products, nurture them and place pilot orders.• Funding R&D and support Indian IPR creation and participate in creation of standards.

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