Economy

‘Daunting challenges for ICT sector’

S Ronendra Singh New Delhi | Updated on January 30, 2018 Published on January 29, 2018

Uncertain future The IT sector is confronting governance challenges, as its model of providing low-cost programming for foreign clients comes under threat from rapid technological change   -  The Hindu

Telecom going through a stressful period, with growing losses, debt pile and price wars, says Survey

The Economic Survey, which substantially uses technologies such as Big Data, says the nation’s information and communication technology (ICT) sector is not in great shape.

The sector declined marginally between 2006 and 2016, contrary to the trend in nations like China, Brazil, Russia and the Philippines, indicating rising competition for India from such countries, Economic Survey 2017-18 has pointed out. ICT accounted for 67 per cent of India’s services exports in 2016, compared with 68 per cent in 2006, as per World Bank data cited by the Survey.

Chief Economic Advisor Arvind Subramanian also expressed concern about the IT sector confronting governance challenges, as its model of providing low-cost programming for foreign clients comes under threat from rapid technological change.

“So, one might say that India had moved from ‘crony socialism to stigmatised capitalism’. It is that zeitgeist of stigmatised capitalism — an accumulated legacy inherited by the government — that made policy reforms so difficult and makes the recent progress in addressing the Twin Balance Sheet challenge noteworthy,” he said.

Services sector

On the bright side, the survey points out that the growth of India’s services sector is expected to improve in 2017-18 vis-a-vis 2016-17. This improvement is also reflected in the Nikkei/ IHS Markit Services Purchasing Manager’s Index (PMI), which was 48.5 in November 2017 but improved to 50.9 in December 2017.

“The prospects look bright with good performance of sub sectors like tourism, aviation, and telecom, robust services trade performance with even growth of major services like software returning to positive territory. The downward risk, however, lies in the external environment for software and business services,” the survey said.

The IT-BPM sector grew 8.1 per cent in 2016-17. Many initiatives have been taken to promote this sector, including the establishment of BPO Promotion and Common Services Centres to help create digital inclusion and equitable growth and provide employment to 1.45 lakh persons. These employments are mostly in small towns.

Other measure include setting up a separate North-East BPO Promotion Scheme with 5,000 seats and an employment potential of 15,000 persons; preparing the draft Open Data Protection Policy law; and long-term initiatives like Digital India, Make in India, Smart Cities, e-Governance, push for digital talent through Skill India, drive towards a cashless economy and efforts to kindle innovation through Start-up India.

The IT-BPM industry grew at $139.9 billion (excluding e-commerce and hardware) in 2016-17 from $129.4 billion in 2015-16, as per Nasscom data. IT-BPM exports grew 7.6 per cent to $116.1 billion from $107.8 billion during the same period. The e-commerce market is estimated at $33 billion, with a 19.1 per cent growth in 2016-17.

Disruptive entry

The Survey notes that telecom is going through a stressful period, with growing losses, debt pile, price war, reduced revenue and irrational spectrum costs.

Alluding to Reliance Jio, the Survey says: “A new entrant has disrupted the market with low-cost data services and the revenue of incumbent players has fallen. The crisis has also severely impacted investors, lenders, partners and vendors of these telecom companies.”

Telecom penetration

However, despite various bottlenecks, the government is committed to extending the reach of telecom network to remote and rural villages, and bridging the digital divide with support from all stakeholders, it says.

“The government is implementing the flagship BharatNet project (in two phases), to link each of the 2.5 lakh gram manchayats of India through optical fibre network. This is the largest rural connectivity project of its kind in the world, and is the first pillar of the Digital India Programme,” it adds.

Commenting on the Survey, Rajan S Mathews, Director General, Cellular Operators Association of India, said: “The Economic Survey puts the spotlight firmly on enhancing rural penetration BharatNet and a conducive ecosystem for an investment friendly, facilitative policy and regulatory ecosystem. The telecom industry remains the backbone of the PM’s visionary Digital India programme, and will continue to offer all possible support in these iconic reforms, which will truly benefit the poorest of the poor.”

He further said the industry is hopeful that the government will address the concerns around the financial health of the sector in the forthcoming Budget.

“The Survey also mentions the New Telecom Policy, which is in the process of being formulated by the government and we hope that the policy will address the long-term systemic issues being faced by the sector, such as high regulatory levies, high cost of compliance, multiplicity of audits and financial viability,” Mathews added.

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Published on January 29, 2018
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