Government to the Rescue
India has the potential to create a domestic industry over the next 10 years and quick implementation of all the policies will go a long way in achieving this goal
Indian telecom services sector has grown exponentially over the last decade and has established itself as one of the fastest growing markets in the world. This growth in telecom services has created a huge demand for telecom equipment in India, but unfortunately it did not drive a similar growth in the domestic telecom equipment industry and today, we hardly have any world-class telecom product companies from India.
The rapid growth of telecom services and need for fast network rollouts have resulted in a situation where we have to import more than 80% of our telecom equipment needs. The motivation for investment in domestic telecom products and manufacturing was further reduced since India’s signing of ITA-1, which brought down the import duties of telecom equipment to zero.
With no explicit government policy support there was no motivation for component, EMS as well as product ecosystem to develop within the country. This is not only a cause of concern from forex outflow and trade deficit angle, but it also has security implications. In addition, as a country we are losing out a great opportunity to build a potentially large-scale domestic telecom product industry.
The New Telecom Policy (NTP-2012) has recognized the importance of having a strong domestic telecom industry and the government has taken few bold policy level decisions to promote domestic telecom products and manufacturing.
This policy leverages the domestic market demand to create a market-pull for domestic companies to develop, manufacture, and sell their products in India. The government has ensured that PMA policy is compliant to our global trade obligations since it is restricted for government procurement and for procurement of any equipment that has security implications.
Telecom products, like any other electronic products, require a minimum threshold volume to get economies-ofscale which dramatically reduce their costs and help them become competitive. This vicious circle presents a tricky situation for domestic/start-up companies who have to compete against global players, who already have such volumes from their worldwide sales and hence are cost competitive.
The PMA policy attempts to provide a fair opportunity to such domestic com-