Will Sitharaman write a new script for tech and telecom?

After two half-session Union Budget presentations in 2024, the stage is set for Union Finance Minister Nirmala Sitharaman to deliver the first full fiscal budget of Modi 3.0 government. As the nation anticipates the budgetary roadmap for the year ahead, one consensus emerges among industry stakeholders: technology is poised to play an indispensable role across all sectors.

The Interim Budget on 1 February 2024 offered limited announcements on domestic technology adoption. Key areas, such as further incentivising Artificial Intelligence (AI) and semiconductor ecosystems, were deferred, leaving room for future government capital expenditure. Notable technology-related initiatives included a rooftop solar deployment programme, a Rs 1 lakh crore fund to encourage private R&D with 50-year interest-free loans, a push for self-reliant (aatmanirbhar) technology adoption in defense manufacturing, and investments in core electric vehicle infrastructure development.

In the second Interim Budget, Sitharaman introduced a Rs 1,000-crore venture capital fund for space startups and reduced import duties on mobile phones, chargers, and select components. Additionally, the government launched a National Critical Minerals Mission to localise key parts of the technology supply chain, removing import duty restrictions on various critical minerals.

As the state-run BSNL begins to generate higher revenues independently, the Centre could potentially reallocate its financial support to other areas.

As the upcoming fiscal year unfolds, several expectations align closely with the trajectory set last year, underscoring the evolving role of technology in driving India’s economic growth.

Reduction of BSNL Outlay

Starting in March 2025, state-run telecom operator Bharat Sanchar Nigam Limited (BSNL) is expected to complete its 4G network deployment and gradually commence rolling out consumer-grade 5G services. Until now, BSNL has required significant capital expenditure from the central government. In the latest Budget, it was allocated Rs 82,916 crore for its annual turnaround and upkeep.

This scenario is poised to change as BSNL’s revenue generation shows signs of improvement. According to monthly subscriber data released by the Telecom Regulatory Authority of India (TRAI), there has been a noticeable migration toward BSNL. This shift is driven by the recent tariff hike by the three private telecom operators to sustain their 5G capital expenditure, making BSNL an attractive option for price-sensitive users. As the state-run operator begins to generate higher revenues independently, the Centre could potentially reallocate its financial support to other areas.

Satcom Revenue Receipts?

In the upcoming telecom revenue receipts, it will be worth observing whether the Centre includes potential revenue from satellite network services as a formal revenue stream. This speculation arises as the long-awaited administrative allocation of satellite spectrum is expected soon. This development would grant players like Jio-SES, Airtel-OneWeb, and Elon Musk’s Starlink access to satellite-based Internet connectivity spectrum.

The revenue receipts for the 2025 Budget will indicate whether Satcom services are a priority for the Centre or whether the sector should expect further delays.

This is expected to bring multiple tranches of revenue to the Centre—one, a licensing fee from the operators for the spectrum allocation, and two, a share of the revenue from operations tied to the licensed spectrum. Besides, the revenue receipts for the 2025 Budget will indicate whether satellite communications services are a priority for the Centre or whether the sector should expect further delays.

Product Manufacturing Incentivisation

The Centre reportedly plans to incentivise manufacturing products and product brands in India, with discussions of nearly USD 5 billion in incentives gaining traction. These initiatives aim to promote indigenous product brands, providing a pathway for India to increase the value generated from its electronics assembly lines. The approach mirrors China’s role in assembling Apple’s iPhones, where the bulk of value from innovation accrues to Apple in the US.

In the future, India aims to adopt a similar strategy, with Union Budget 2025 expected to outline measures encouraging brands to develop and market their patents and product IPs. This approach seeks to position Made in India brands as strong competitors to global names in the domestic market. It remains to be seen if capital expenditure towards India’s electronics manufacturing industry makes the cut for the union finance minister, as an early meeting affirmed that the Centre wants to “improve quality spending” in order to be on track for the current regime’s target of making India a developed nation by 2047.

More Sops for Semiconductors

Following an initial wave of investment that led to the establishment of a dedicated semiconductor foundry or fabrication plant (fab) and four chip testing facilities, including outsourced semiconductor assembly and test (OSAT) and assembly, testing, marking, and packaging (ATMP) plants, India’s semiconductor industry is now poised for its next phase of capital infusion. Reports suggest that the next tranche of funding for the sector could reach up to USD 15 billion as the country aims to bolster its position in the global technology supply chain.

While additional incentives for semiconductors appear almost inevitable, it remains to be seen if they will feature in the next fiscal outlay. Semiconductor investments are intricately linked to the manufacturing ecosystem, with the success of both dependent on seamless industry deployment and integration.

Bigger Push for Private R&D?

The fifth critical aspect of technology and telecom is the advancement of private-sector research and development for Indigenous technologies. In 2024, India took a significant step by creating its own telecom infrastructure stack, successfully deployed jointly by the Tata Group-backed Tejas Infrastructure, public-sector company C-DOT and TCS in BSNL’s 4G network services. The Centre has also repeatedly underlined the need to incentivise further and deploy such initiatives to ensure India’s telecom infrastructure is entirely homegrown while positioning it for export to global markets.

The Centre wants to “improve quality spending” in order to be on track for the current regime’s target of making India a developed nation by 2047.

Private research and development will play a pivotal role in achieving this vision. To support this, the Centre might introduce a targeted research fund as part of its economic growth strategy, allocating specific resources to develop core technologies. Strategic partnerships with educational institutes could also be incentivised to foster advancements in core technologies such as AI and telecom. These initiatives could be a part of the FY26 annual Budget, slated to be presented on Saturday, 1 February 2025.

By Vernika Awal

feedbackvnd@cybermedia.co.in