Technology, knowledge and skill-driven growth prospects

Budget 2023 is designed to strengthen the telecom sector and create a robust digital infrastructure critical to fully realise India’s long-term growth potential

The Indian Union Budget 2023 places a strong emphasis on digital public infrastructure as a driving force for growth. The Economic Survey 2022-23 states that India’s digital public infrastructure could increase its potential GDP growth rate by up to 1%.

India’s digital growth has been led by initiatives such as Aadhaar, Jan Dhan Yojana, CoWIN, Unified Payments Interface or UPI, Central Bank Digital Currency, and various fintech developments. This trend is set to continue with the introduction of a simplified Know Your Customer, the KYC process and the strengthening of DigiLocker as a comprehensive data management solution. The establishment of a National Digital Library will provide access to information for a diverse range of socio-economic groups.

India is already the fastest-growing major economy in the world, with a 5.5% average GDP growth over the past decade. However, progress in Science and Technology has hardly been encouraging. India ranked 61st globally in World Economic Forum’s recent Network Readiness Index report, which measures readiness to leverage ICT, among other factors. China is ranked 23, Indonesia is 39, and the US is ranked at the top.

In that context, plans to establish 30 Skill India international centres, 100 labs for developing 5G applications and centres of excellence for Artificial Intelligence could bridge the efforts of the government, research institutions and the industry.

Telecommunications is the foundation of Digital Public Infrastructure. The budget announcements further enable the telecom reforms unleashed since 2021. It allocates Rs 97,570 crore (USD 12 billion) for the Department of Telecommunications, with the largest share going towards reviving the underperforming state-owned operator BSNL.

India is primarily a mobile telecom nation, with around 25 million fixed-line connections versus more than a billion mobile connections. India’s mobile data usage is the highest in the world. However, the country is a late entrant in the 5G space, lagging China, the US, South Korea and EU states by around three years. China reported closing 2022 with one billion 5G connections; China Mobile alone reported more than 600 million. Contrast this with India’s baby steps with perhaps around 25 million 5G connections till now.

Some nations are planning for 6G launches commercially in the later part of this decade. That is a significant time gap, which will be difficult to bridge for India.

• The government has allocated Rs 97,570 crore for the Department of Telecommunications.

• State-run BSNL, which is expected to roll out 4G and 5G services this year, will get a Rs 52,937 crore capital infusion from the government in 2023-24.

• Rs 2,158 crore has been allocated for Optical Fibre Cable (OFC) based network for Defence Services and Rs 715.8 crore for telecom projects in the North Eastern states.

• The Centre has made a provision of Rs 5.56 crore for 5G test beds in Budget 2023-24, down from Rs 7.74 crore in the previous fiscal.

• The Centre of Development of Telematics (C-DoT) has been allocated Rs 550 crore for the fiscal.

• Government to set up 100 labs for developing applications using 5G services, covering smart classrooms, precision farming, health care applications, etc, and three Centres of Excellence for Artificial Intelligence.

• Extension of concessional duty till 31 March 2024 for Lithium-ion cell that is used for manufacturing of battery or battery pack for cellular mobile phone up to 31 March 2024.

• Extension of concessional duty till 31 March 2025 for specific inputs and sub-parts used for manufacturing telecommunication grade optical fibre or OFC.

But the mere high speed of 5G is hardly a proposition. The success of 5G will hinge on applications for enterprise and individual customers. In that context, the proposal for setting up 100 labs for developing 5G applications in engineering institutions is crucial. Even a handful of well-functioning labs could make a difference. The allocation for 5G test beds is Rs 5.56 crore (USD 700,000), which, however, is lower than the previous year’s allocation. This may need to be revisited.

Continuously providing large financial support for BSNL has been frequently viewed as more for social and political reasons and less from a business perspective. What is important now is the deployment of India 4G stack developed indigenously for BSNL. This, if successful, could be a game changer.

Continuing import duty concessions for mobile phone components will aid in fulfilling the ambitions of Make in India through the Production Linked Incentive or PLI Scheme and to emerge as a manufacturing base beyond China and Vietnam.

Similarly, skilling the 900 million-strong workforce is critical to harnessing the demographic dividend. The proposal to train our youth in emerging technology areas under the Pradhan Mantri Kaushal Vikas Yojana is a must. This initiative needs to be aligned with academic institutions and industry.

With an estimated current annual economic output growth of over USD 400 billion and the potential to exceed USD 500 billion post-2028, India is poised to be one of only three economies capable of such growth. This can be achieved through substantial investment in physical and social infrastructure. The allocation of 3.3% of GDP towards physical infrastructure is absolutely in the right direction.

While it is clear that the government has to do the ‘heavy lifting’ considering the modest private sector investment outlook amid global economic stress, the realisation of this growth potential is contingent on a robust digital public infrastructure on the backbone of India’s telecom sector.

By Jaideep Ghosh

Jaideep is Chief Operating Officer at Shardul Amarchand Mangaldas & Co

(Views expressed in this column are personal)

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