Since Indian Prime Minister Modi took office in May, he has encouraged investor optimism at home and abroad by vowing to open greater opportunities to trade with and manufacture in India. The Prime Minister has outlined several bold pro-growth economic reforms, including a promising “Digital India” initiative, and recently met with President Obama on enhancing trade and investment ties.
Unfortunately, Modi’s pro-growth messages have yet to be translated into concrete actions in the telecommunications sector. In fact, we’ve seen quite the opposite from his government. India’s new leadership has yet to take action to alleviate barriers of trade including domestic manufacturing requirements for telecommunications equipment. And in his July Budget Speech, Indian Finance Minister Arun Jaitley announced a 10 percent tariff increase for a broad range of telecommunications equipment, even though India has committed to maintain zero duties on these goods under the WTO Information Technology Agreement (ITA).
This tariff increase is extremely disappointing to hopeful information and communications technology (ICT) companies, as it is in line with previous Indian Administrations’ regressive trade policies that have prevented India from achieving its full potential in the telecommunications sector. U.S. companies have long been a critical partner in supporting the remarkable growth of India’s telecommunications sector. This growth has benefited all of India’s citizens, who have access to some of the world’s most inexpensive and competitive wireless offerings, helping to drive ICT-enabled growth, development and job creation. These tariff increases will not only directly impact U.S. ICT manufacturers and managed service providers, but will undermine India’s telecommunications operators and consumers by increasing the costs of the most competitive ICT technology.
These unfavorable policies are also puzzling because it’s clear that Prime Minister Modi realizes the importance and potential of the ICT industry in India. In his Independence Day speech, for example, the Prime Minister announced a “Digital India” initiative to make broadband services available in rural India. The goal of the initiative is to change the life of India’s poor by providing them access to e-medical facilities and online education courses.
If Prime Minister Modi wants to succeed in reaching this goal and in making India a digital leader, he must embrace policies that encourage foreign investment and innovation in the ICT sector. The telecommunications tariff increase only creates uncertainty for the industry since the ITA is meant to cover these products, and trade barriers make India an unfavorable place for foreign companies to do business.
Prime Minister Modi must take action to resolve these issues and restore the global industry’s confidence in India’s business and foreign direct investment environment. The ICT industry will then stand ready and willing to work with the Government of India to promote and grow telecommunications in India.
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