Ray of Hope

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Amid global downturn, which has started taking its toll on the telecom market, the domestic production of telecom equipment products will cross the Rs 50,000 crore mark during fiscal 2008-09, according to Telecom Equipment Manufacturers Association of India (TEMA).

Crossing this landmark figure may look like a major achievement. But there is nothing to celebrate. Though manufacturing of telecom equipment is estimated to go up to Rs 51,800 crore in the current financial year from Rs 41,270 crore in 2007-08, the growth rate of the production is expected to come down to about 27-30% in the current fiscal from an all time high of 71% in 2007-08.

The possible decline in growth rate is on account of the global recession. A 7-8% GDP growth in India during the fiscal will also not help the telecom equipment industry to clock the previous growth rates.

Highest increase has been recorded in wireless equipment manufacturing including cellular mobile phones where the production is expected to go up from Rs 10,545 crore in 2006-07 to Rs 28,600 crore, in 2008-09.

Though India does not have a strong component base, which is the lifeline for telecom equipment production, the country could become a hot bed for mobile phone production if the government could step up its investment in infrastructure through private-public participation.

The wireline equipment production is expected to go down from Rs 11,780 crore in 2007-08 to Rs 9,450 crore this fiscal due to reduced demand from operators. The market leader BSNL is already formulating strategies to enhance its wireline phone coverage. A speedy implementation of BSNL plans will help to regain the lost glory in the wireline equipment space.

TEMA, while releasing the production data, has asked the government to announce a special package of incentives to boost the wireline industry.

I feel the government should also take steps to improve the power situation across the country. Lack of power is one of the deterrents in the telecom growth. Several operators, who are going to launch mobile services for rural masses, will face huge operation expenditure on account of power consumption. Though operators can adopt green telecom technologies and products to increase power efficiency and management, improvement in power condition will be a breather for the industry.

During the slowdown, government is formulating several measures to support the industry including the duty cuts. Since telecom infrastructure and services is the backbone of any growing economy, telecommunication industry should get maximum sops from the government.

The government has already relaxed external commercial borrowing norms. This will help several operators to raise funds abroad in order to fund their 3G and WiMax roll outs. This will also assist the telecom ministry to achieve its target of approximately Rs 40,000 crore through spectrum auctions.

Baburajan K
baburajank@cybermedia.co.in