The performance of an economy has a direct connection with the state of its infrastructure. While infrastructure
facilities like Roads, Railroads, Ports, Airports, etc. are essential,telecommunications is special – it is a critical catalyst for growth. An ITU study oftelecommunications and development, The Missing Link, concluded that”telecommunications can increase the efficiency of economic, commercial, andadministrative activities, improve the effectiveness of social and emergencyservices and distribute the social, cultural and economic benefits of the processof development more equitably throughout the country.” Considered as the backbone of industrial and economic development, the telecom sector has been aiding delivery of voice and data services at rapidly increasing speeds, and thus, has been revolutionizing communication.
The coming together of telecommunications and information technology has changed the way we live, the way interact with others, the way we look at education, entertainment, money etc. and the way we do business. The growing influence of information technology is remarkable in every sphere of our lives. For an emerging economy and a nation with extreme diversity like India, Mobile Technology and Mobile-Enabled Services are a game-changer. They are bridging the stubborn rural-urban divide. With close to 1 billion mobile connections across the country, India represents a quarter of all mobile connections in Asia Pacific, and this figure is expected to rise to 1.16 billion by 2017.
With potential to empower of the entire nation, telecommunications deserves a special treatment from the government. Unlike the last year’s Union Budget when the government imposed an 11.5% import duty on all handsets imported in India, the status quo in this year’s Union Budget is a big relief for all of us. Sometimes, even status quo is good. Yet, I feel this year’s budget will benefit the telecom sector in an indirect – but more certain – manner. You need not be an economist to conclude that this year’s budget is meant to rev up the rural economy, help farmers and create jobs in the rural areas. And this has a significant impact on the telecom industry that I represent. As the rural economy grows, our citizens in hinterland aspire for roti, kapda, makaan, and a better life, and the mobile phone is a natural extension of rural aspirations today.
For agriculture-dependent rural population, a mobile connection – with an internet connection – is an aspiration as well as an enabler. For a long time, India has been an agriculture-dominated economy. While the contribution of agriculture sector to India’s GDP has declined in the last couple of decades, it is still one of the major sectors, contributing nearly 14% of the economic output of the country. The sector provides livelihood to a vast majority of rural mass consisting about three-fifth of India’s population. It is this population that will drive the economic growth in the coming decade and the telecommunications will play an important role.
In his budget, the Finance Minister ArunJaitleyhas announced higher allocations towards various rural and infrastructure schemes. The budget has taken significant measures to expand the acreage with irrigation facilities and conserve soil fertility and improve yields, while ensuring optimal utilization of water resources by sustainable management of ground water resources. We feel that higher spending on rural sector would help in driving demand – and consumption – in the rural economy, which is under severe stress following two consecutive years of droughts. Apart from increasing rural spending, the government is also taking significant measures such as decentralized procurement and online procurement system by the Food Corporation of India to ensure that the benefit of MSP reaches poor farmers. This augers well with Prime Minister’s stated objective of doubling farmers’ income by 2022.
Today, telecom is everywhere, and it is linked to everything – agriculture, business, banking, entertainment and many more. If the Union Budget has a special focus on enhancing expenditure in priority areas of – farm and rural sector, social sector, infrastructure sector employment generation and recapitalization of the banks, then the logical beneficiary will be the mobile telephony industry.
Let’s look at the banking sector – Mobile payments isthe trend that is gathering momentum and is likely to change the way we bank altogether. It’s a beautiful marriage between telecom and banking. The Union Budget aims to give a push to public sector banks and to the entire banking sector. As far as I can see, more people have access to banking through mobile than through physical branches. In my personal opinion, this is great news for companies like Swipe Telecom. Another enabler is the JAM Trinity: the Jan Dhan + Aadhar + Mobile combine that the government wants to accelerate so as to empower the poor. Under the Jan Dhan initiative, accounts were opened at zero-cost.
With JAM, it is ensured that money trickles into their accounts seamlessly. The third pillar – mobile telephony – is a huge contributor to government programs in education, labour schemes (MGNREGS), subsidies, pensions (NSAP), personal insurance et al. In light of initiatives like Digital India, Make in India, Skill India, Start-Up India, it was equally critical for the budget to provide support at the infrastructure and policy level to realize these dreams.
Other proposals that may have a positive impact on the telecom sector are the proposals to introduce Dispute Resolution Scheme which provides for an option to tax payers to settle their existing tax litigation (including litigation caused due to retrospective amendments), and other tax rationalization measures relating to processing of tax refunds, grant of stay of demand, etc.
However, certain other key demands of the industry as regards bringing clarity on certain tax issues have been ignored. Specifically, characterization of discounts offered to telecom distributors, exclusion of standard telecom services from ‘Royalty’, shall continue to confuse players in the industry.
In his budget, the Finance Minister has clarified on the interpretation of spectrum by saying that the assignment of right to use radio frequency spectrum will now be treated as a service and be liable to service tax. With this clarification the market will open up in terms of trade in spectrum, in dispelling controversies and in avoiding protracted tax litigation.