India's telecom regulator believes the country should aim for zero imports of telecom network equipment by 2022. In keeping with the Indian government's "Make in India" policy to support local manufacturing, it has recommended setting up a fund of 10 billion Indian rupees ($142 million) to promote research and innovation in the sector.
India remains dependent on imports of telecom gear, which have increased in value from $14.7 billion in 2014/15 to about $21.8 billion in 2017/18. Its exports, meanwhile, fetched as little as $1.2 billion in 2017/18, according to data from the Telecom Regulatory Authority of India (TRAI) .
To aid the development of local capabilities, regulators also recommend setting up a Telecom Equipment Development Board (TEDB) under the Department of Telecommunications for "faster and coordinated decisions relating to funding and incentives for design development and manufacturing of telecommunications equipment in the country."
With data consumption on the rise, security concerns largely explain why India wants to be more self-reliant. Government-led plans like Digital India and Smart City Mission will obviously make India more dependent on digital platforms in the future. But authorities also hope the manufacturing push will create additional jobs in a telecom sector that has recently been hit by thousands of merger-induced layoffs.
The TRAI's broad vision is to transform India from being an import-dependent country to one that is self-reliant by 2022. But this will clearly not be straightforward. Indeed, catching up and competing with established industry giants will be a huge challenge for India's home-grown firms.
Costs will play a crucial role. Like other telcos, India's operators demand high-quality products at competitive rates. Ericsson AB (Nasdaq: ERIC), Huawei and Nokia Corp. (NYSE: NOK), the industry giants, have been able to provide this because of their vast economies of scale. They also have years of experience in research and development, and have invested many billions of dollars in this area in the last few years. With their experience and customer relationships, they will be hard to beat.
What's more, Chinese companies, including Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), are already known to compete on price. In the past, they have even offered loans at attractive rates to secure deals with service provider customers. Ericsson, meanwhile, has voiced concern that manufacturing in India may be unviable due to infrastructure gaps and high taxes. While Indian firms like Tech Mahindra Ltd. , Subex Ltd. and Wipro Ltd. (NYSE: WIT) have made their presence felt in the software market, there are hardly any Indian manufacturers.
Even so, India's regulator could always force Indian telcos to buy a certain percentage of goods locally. It might also try offering discounts on licensing fees to service providers that do so. And a disruptive player like Reliance Jio might be eager to support government ambitions, as long as they do not prove damaging. But restricting choice and competition is rarely seen as a positive step.
— Gagandeep Kaur, contributing editor, special to Light Reading