Debate on Models of Development in India

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DEBATE ON MODELS OF

DEVELOPMENT IN INDIAModule III


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DEBATE ON MODELS OFDEVELOPMENT IN INDIA

INTRODUCTION In a democracy, it is an essential prerequisite to have an ideal

model of development.

The formulation and implementation of policies greatly depend onthe model of development adopted for this purpose.

Several debates took place in the Indian political and businesscircles, about the time of Independence and Constitution making inIndia, on the future course of development of India.

The purpose of evolving an ideal pattern was not only to safeguardthe democratic principles but also create necessary social and

political conditions to ensure an overall development.


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The debates on the issues of development

were complex and diverse ranging from land

policies to the industrial development and

planning


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DEBATE ON MODELS OF DEVELOPMENTIN INDIA

BACKGROUND

It has been seen in the previous unit that, about thetime of independence, three broad streams of thinkingon Indias socio-economic development crystallised:capitalist industrialisation with minimal state controland support, socialist industrialisation under stateguidance and the Gandhian view ofsarvodayaphilosophically based on a distrust of state power.

The ideological debate was complicated by the politicaland economic problems arising out of the SecondWorld War and partition of the country.


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Thus, the question of control over food supply

that had been imposed during the war became

critical for a country that had just lost the richest

food-producing provinces to Pakistan and hadbeen inundated by a huge refugee influx.

Gandhi opposed control on moral ground as it

enhanced corruption and control was abolished. As a result food prices rose steeply and control

had to be re-imposed


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CONFUSING OVERLAPS The three broad streams of thinking mentioned above were not

clearly demarcated from each other.

No Indian political leader was more committed to the poorest ofthe poor than Gandhi.

This placed him close to the socialist position. But no Indian had agreater distrust for the state power than Gandhi and this made himmorally opposed to state control of economic activities. This madehim a favourite of the Indian capitalist class.

Yet the Indian capitalists rejected Gandhis stress on the small and

cottage industries which, according to them, might be temporarilyaccommodated but only for meeting the problem ofunemployment in the country.


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Like the capitalists, the socialists believed in

large-scale industries as the chief strategy in

solving the economic problems of the newly

decolonised underdeveloped countries and,naturally, rejected the efficacy of the small

and the cottage industry.

But, unlike the capitalists, they were firmbelievers in state control.


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A part of this debate concerned the traditional socialistpolicy of nationalization as had been implemented inthe Union of Soviet Socialist Republics.

Nehrus utterances before independence and his

installation as the Prime Minister of the Government ofindependent India raised a certain alarm among theIndian capitalists.

The same reason, combined with the rise of militancyamong the industrial working class in India, raisedcritical questions about industrial relations.

The Indian capitalists naturally did not like tradeunionism and state support to the cause of labour.


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Gandhi supported trade unionism as long as itworked in amity with the owners of industriesand set aside the philosophy of class

contradiction. The socialist doctrine was based on class

contradiction.

This made it possible for the industrialcapitalists of India to use Gandhis name in aidof their position.


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It was only on the question of land reforms thatthe broadest amount of national consensus hadbeen reached.

This was partly because permanent settlement ofland did not encompass the entire country and abig chunk of the permanent settlement area wastransferred to Pakistan East Bengal.

YetJagirdari and other intermediate right ownersin the rest of British India were unhappy aboutthe new trend


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1. THE DEBATE ON LAND POLICY It may be convenient to start with the question of land reform on

which the broadest consensus was obtained.

It has been seen in the earlier unit that even the Bombay Plan ofthe big industrialists of India envisaged land reforms.

On 28 June, 1946 the Eastern Economist, house journal of theBirlas, made a strong case for land reform declaring that thelandlord has no economic justification for his existence.

In December 1946 the sub-committee on land reform of theNational Planning Committee of the Congress headed by J.C.

Kumarappa, a staunch Gandhian, laid down three stages of landreform: abolition ofzamindari and otherintermediary rights, grantof tenancy right to the actual cultivator and ceiling on land holding


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The fate ofzamindari and intermediary rights was thussealed.

The debate, therefore, focusedon compensation.

During discussion on the right to property in theConstituent Assembly of India this issue acquiredpoignancy.

On 2 May 1947 Raja Jagannath Baksh Singh moved anamendment to the draft article on the right to propertywhich allowed acquisition of private property by thestate, for public purpose, against compensationinserting the word just (before compensation).


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Sardar Vallabhbhai Patel rejected the amendment proposalmaking it clear that the zamindars or some of theirrepresentatives could not thwart the programme of landreform in that way.

They must recognise the times and move with the times,he announced.

Legislations had already been undertaken in the provincesfor the abolition ofzamindari and laws to that effect wouldbe made even before the Constitution came into force.

The process of acquisition is already there and thelegislatures are already taking steps to liquidate thezamindaris, Patel declared


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2. THE SYSTEM OF CONTROL

The system of control and ration on foodsupply had been necessary during World War

II for the Imperial Government for thepurpose of food supply to the war fronts.

At the end of the War it was continued in

view of continued uncertainty of the market.Partition only aggravated the scarcity in thefood front


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As early as 14 January 1944, the Eastern

Economist, had suggested aprogressive

strengthening of the present system of

controls, in scope and character, so that notonly may it strengthen the smooth transition

to peace economy, but may also become the

instrument of long-term economic planning inour country. In 1946, however, the issue

became contentious


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Early that year the Commodity Prices Board, consisting ofnoted economists A.D. Gorwala and D.R. Gadgil wasappointed.

It submitted a report in the same year recommending notabolition but the improvement of the system of controls.

On the other hand, the Food-grains Policy Committee,appointed in September 1947 with mostly industrialmagnates as members, adopted by a majority andsubmitted in December the same year an interim reportrecommending reduction of the Governmentscommitment under the existing system of food controls.


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As has been noted in the earlier unit Gandhi

lent his moral support to the decontrol

demand and control was lifted for a period.

When the prices rose high, control was again

imposed.


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3. THE ISSUE OF NATIONALISATION Indian businessmen were alarmed at the talk of nationalization

emanating from the socialists and the left radicals.

On 14 June 1946, the Eastern Economist declared: We rejectunreservedly the Soviet ideal of complete and immediate

socialisation of the whole range of the economy. At the twentieth annual session of the Federation of Indian

Chambers of Commerce and Industry, Jawaharlal Nehru had toassure the businessmen.

It is wrong to imagine, he said, that this Government is out toinjure industry. It will be folly on our part. We want to providefacilities for industry and facilities for production technical,scientific and power resources and all that. On 4 April 1947, in anaddress to the All-India Manufacturers Organisation he repeatedthe assurance


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THE ISSUE OF PLANNING Though there was a general welcome to the idea of

planning among all sections of the Indian population, theideas about the character of the plan varied among them.Indian businessmen firmly rejected the Soviet-typeplanning and welcomed a vague system of state guidance.

They would even welcome a state role in the expansion ofbasic and heavy industries for which the private sector didnot have much resource.

But the states role, according to them, would be minimal. The socialists and the left radicals envisaged a much greater

role of the state in the national economic activities.


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INDUSTRIAL RELATIONS It was at the trade union front that the sharpest conflict

arose.

When the All-India Trade Union Congress (AITUC) was set

up in 1920, at the instance of the International LabourOrganisation, Congressmen, by and large, distancedthemselves from it. They joined it only after the Gayasession of the All-India Congress Committee in 1922.

The Ahmedabad Textile workers Union, directly patronised

by Gandhi, never joined it. As a result the AITUC was under strong influence of the

communists and the socialists.


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When, in and after 1942, in the wake of the Quit India movement,Congressmen, including the Congress socialists, went to jail in largenumber the field was almost entirely left to the communists

The differences were aggravated by two main factors.

In 1942 the Communist Party had opposed the Quit India

movement on which ground the communist members of the All-India Congress Committee were expelled.

Secondly, after the end of the Second World War, Communistmilitancy in the labour front increased greatly.

In view of the smooth transfer of power, that was accompanied bysmooth transfer of several British industries to Indian hands, thislabour militancy was disliked by the Congress leadership that hadthe support of the Indian big business.


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Congress leaders prescribed compulsoryarbitration of industrial disputes and disfavouredthe workers right to strike

In early 1947, Hindustan Mazdoor Sevak Sanghwas set up with the Ahmedabad Textile WorkersUnion as the nucleus.

In view of the Sanghs failure to gather strength,in May 1947 the top leaders of the Congress met

in New Delhi at a high-level conference under theleadership of Patel and decided to have aseparate labour organisation.


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As a result the Indian National Trade Union

Congress (INTUC) was set up.

Within about another year, two other central

labour organizations cropped up: the Hind

Mazdoor Sabha (splitting from the INTUC) and

the United Trade Union Congress (splitting

from the AITUC


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At the time of transfer of power, when Indiancapitalism was coming to its own, therefore theissue of class contradiction acquired sharpness

and it naturally affected industrial relations. For the capitalists industrial peace was necessary

for industrial development and militant tradeunionism was inimical to industrial peace.

Since Independence the Communists andSocialists wanted that the class relations withinthe economy to be immediately settled.


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THE POLITICAL DEBATE The ideological debate had its impact on the politics around the

period of independence.

The first post-war budget was inflationary.

To counteract the inflationary tendency of the national economy,

the finance minister of the Interim Government, Liaquat Ali Khan,presented a budget which proposed a 25% tax on all businessprofits above one hundred thousand rupees.

The tax was intended to restrict the spending habits of the wealthyIndians and had a socialistic colour.

But it created a furore among the Congressmen who alleged thatthe budget was aimed at harming the interests of the businessmenwho were mostly Congress supporters.


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This budget practically sealed the fate of the Congress-Leaguecooperation and was one of the major factors leading to thepartition of the country

On the eve of independence, in June 1947, the Central Committeeof the Communist Party of India concluded that though the forces

of freedom movement had compelled the imperial rulers to opennegotiations with the Indian leaders, the former were trying toforge a new alliance with the princes, big landlords and big businessof India in order to control the Indian state and economy.

Yet, the party held that the agreement embodied in theMountbatten proposal of 3 June 1947 for partition of British India

offered new opportunities for national advance and the twopopular governments and Constituent Assemblies were strategicweapons in the hands of the national leadership.


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It welcomed Independence on 15 August

1947. In December 1947, however, it reversed

the position and called the acceptance of the

Mountbatten plan an abject surrender on thebasis of an imperialist-feudal-bourgeois

combine.

The resolution led to the communist militancyin 1948-49


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In 1947 the Forward Bloc left the Congress. On 28 February 1947the Congress Socialist Party decided to drop the word Congressfrom its name. Rammanohar Lohia, a socialist leader, accused theCongress of compromising with the vested interests.

In March the party opened membership to non-congressmen. In

March 1948, Sardar Vallabhbhai Patel, after having been accused ofneglecting the security of Mahatma Gandhi, who had beenassassinated in January 1948, decided to quit the Congress.Jayaprakash Narayan declared that the Draft Constitution framed bythe Constituent Assembly of India was clumsy and not inspiring.

The partys Legislative Assembly members in U.P., who had been

elected on Congress ticket, resigned and sought re-elections butwere defeated


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The period around Independence, therefore,

saw sharp ideological debate on the future

course of Indias development. No wonder, the

ideological debate was partly reflected in theproceedings of the Constituent Assembly of

India that framed the Constitution


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THE OBJECTIVES RESOLUTION OF THE CONSTITUENT ASSEMBLY OFINDIA

All these issues were sought to be sorted out in the ObjectivesResolution that was passed in the Constituent Assembly of India ina fairly early stage of its proceedings.

That resolution pledged to establish an independent SovereignRepublic of India which, along with its component parts, wouldderive all power and authority from the people of India.

This would also guarantee to all people of India justice, social,economic and political; equality of status, of opportunity andbefore the law; freedom of thought, expression, belief, worship,

vocation, association and action, subject to law and public morality. Further, adequate safeguards would be provided for minorities,

backward and tribal areas, and depressed and other backwardclasses.


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Globalization and Liberalization inIndia

Module III


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Globalization and Liberalization

Globalization and liberation are directly linkedwith each other.

The first wake of globalization started in Indiawhen the economic liberalization policies were

undertaken in the 1990s by Dr Manmohan Singh,the then Finance Minister of the country.

Since then, the economy of India has improved toa great extent and has significantly led to the rise

in the standard of living of the citizens.


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Pre liberalization period and globalization From independence till the later part of the 1980s,

India economic approach was mainly based ongovernment control and a centrally operated market.

The country did not have a proper consumer orientedmarket and foreign investments were also not comingin.

This did not do anything good to the economiccondition of the country and as such the standard ofliving did not go up.


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In the 1980s, stress has given on globalizationand liberalization of the market by the Congressgovernment under Rajiv Gandhi.

In his government tenure, plenty of restrictionswere abolished on a number of sectors and theregulations on pricing were also put off.

Effort was also put to increase the condition of

the GDP of the country and to increase exports.


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Even if the economic liberalization policies wereundertaken, it did not find much support and thecountry remained in its backward economic state.

The imports started exceeding the exports and the

India suffered huge balance of payment problems.

The IMF asked the country for the bailout loan.

The fall of the Soviet Union, a main overseas businessmarket of India, also aggravated the problem.

The country at this stage was in need of an immediateeconomic reform


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Liberalization in the 1990s It was in the 1990s that the first initiation towards

globalization and economic liberalization wasundertaken by Dr Manmohan Singh, who was the

Finance Minister of India under the Congressgovernment headed by P.V. Narasimha Rao.

This is perhaps the milestone in the economic growth ifIndia and it aimed towards welcoming globalization.

Since, the liberalization plan, the economic conditiongradually started improving and today India is one ofthe fastest growing economies in the world with anaverage yearly growth rate of around 6-7%.


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Impact of globalization and liberalization Globalization and liberalization has greatly influenced the

Indian economy and made it a huge consumer market.

Today, most of the economic changes in the country are

based on the demand supply cycle and other economicfactors.

Today, India is the worlds 12th largest economy in terms ofmarket exchange rate and 4th largest in terms of thePurchasing Power Parity.

According to a report by the World Bank, the Indian marketis expected to grow at around 8% in the year 2010.


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Globalization and liberalization has also made a positiveimpact on various important economic segments.

Today, the service sectors, industrial sectors and theagriculture sector have really grown to a great extent.

Around 54% of the annual Gross Domestic Product (GDP) ofIndia comes from the service industry while the industrialand agriculture sector contributes around 29% and 17%respectively.

With the improvement of the market, more and more new

sectors are coming up and reaping profits such as ITservices, chemical, textiles, cement industry and so on.With the increase in the supply level, the rate ofemployment is also increasing considerably


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There has been an improvement in the manufacturingsector as well which grew from 8.98% in 2005 toaround 12%.

The communication segment has grown up to around

16.64%. The condition is expected to improve furtherwith more demand and increase in customer base.

The yearly growth of the industrial sector has beenaround 6.8 % which will rise more in the future.

India is one of the well known industrial markets in theAsia-Pacific region


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Globalization and foreign investment One of the main aspects of globalization is foreign

investment.

India today has emerged as one of the perfect markets for

foreign investors due to its vast market base. More and more foreign companies are investing in the

Indian market to get more returns.

The foreign institutional investments (FII) amounts toaround US$ 10 billion in FY 2008-09, while the rate of

Foreign direct investments (FDI) has grown around 85.1% in2009 to US$ 46.5 billion from US$ 25.1 billion (2008).


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Liberalization in Different Sectors

of IndiaMODULE III


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Liberalization of Indian

Telecommunication SectorModule III


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Liberalization of IndianTelecommunication Sector

The Liberalization of Indian Telecommunication Sectorin the early 1990s was the effect of economic reformspromulgated by the Government of India to align itseconomy with the world economy.

Further the economic renaissance of India catalyzedthe need for the opening of Indian telecommunicationindustry.

Since independence the number of basic

telecommunication services network has expandedfrom about 84 thousand connections to around 385.95lakh connections as on March 31 2002.

f


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The basic service network represents themajority of the telephone subscription, whichaccounts for around 86% of the total

telecommunication network in India. Post 1990s, the Government of India did away

with its old monopoly-market concept andshifted to open-market policy regime.

b l f d


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The Indian telecommunication industry'scontribution towards the overall health of Indianeconomy is substantially high in the recent years.

The history of the Liberalization of Indian

Telecommunication Sector suggests thatalthough, this industry has maturedtremendously over the last fifteen years but hugescope of growth still waits to be explored.

The urban India is well connected with basictelephone services but the semi-rural area needsimmediate attention.

ib li i f di


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The rural- India today is the most neglected in

the area of telecommunication connectivity.

Huge scope of growth is lying still untapped in

the area of rural telecommunication

networking, especially in the area of basic

telephony and Internet

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The Government of India is now more focused onfaster connectivity of rural-telephony in rural India anddrafted its latest telecommunication policy to attractinvestments for the growth of Indiantelecommunication industry.

The latest telecommunication policy of India offershost of fiscal incentives and tax rebates to attractinvestors, both domestic and foreign investors.

The era of post Liberalization of Indian

Telecommunication Sector, witnessed formation of'Department of Telecommunication' (DOT) and the'Telecom Regulatory Authority of India' (TRAI).

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These two independent bodies operate in sync

and under the guardianship of the Ministry of

Telecommunication Government of India.

These independent bodies have earned goodreputation for transparency and competence

of governance

Lib li i f I di


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The main service providers in the Indiantelecommunication sector are as follows - Stateowned telecommunication companies like - VSNL,BSNL and MTNL

Private Indian telecommunication companies like- Tata Teleservices and Reliance Infocomm

Foreign telecommunication companies like - Idea

Cellular, BPL Mobile, Spice Communications,Hutchison - Essar, Bharti Tele-Ventures, Escotel,etc

Lib li ti f I di


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The main objectives of the telecommunication industry after theLiberalization of Indian Telecommunication Sector are as follows

Creating world class telecommunication infrastructure to meet therequirements of growing Indian industries

Easy and affordable access to basic telecommunication services

across India Establishing a modern and efficient telecommunication

infrastructure to meet the requirements of modern industrialnation

Modernization of the Indian telecommunication industry

Provisions for entry of private players into the Indiantelecommunication industry

Provide an equal opportunity for all the telecommunication serviceproviders operating in India

Lib li ti f I di


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Status of the telecommunication sector post Liberalizationof Indian Telecommunication Sector (as on 31.03.2002) areas follows

Total number of telephone exchanges - 35023

Total number of rural telephone exchanges - 26,953

Total number of fixed telephone subscribers - 385.95 lakh

Total number of cellular mobile phone subscribers - 64.31lakh

All India tele-density - 4.4

Total number of village PCOs - 4.68 lakh Total number of Internet subscribers - 38 lakh

Lib li ti f I di


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Indian Telecom Sector Introduction The telecom services have been recognized the world-over

as an important tool for socio-economic development for anation.

It is one of the prime support services needed for rapidgrowth and modernization of various sectors of theeconomy.

Indian telecommunication sector has undergone a major

process of transformation through significant policyreforms, particularly beginning with the announcement ofNTP 1994 and was subsequently re-emphasized and carriedforward under NTP 1999.

Lib li ti f I di


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Driven by various policy initiatives, the Indiantelecom sector witnessed a completetransformation in the last decade. It has achieveda phenomenal growth during the last few yearsand is poised to take a big leap in the future also.

Status of Telecom Sector

The Indian Telecommunications network with 621

million connections (as on March 2010) is thethird largest in the world. The sector is growing ata speed of 45% during the recent years.

Lib li ti f I di


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This rapid growth is possible due to various proactive andpositive decisions of the Government and contribution ofboth by the public and the private sectors.

The rapid strides in the telecom sector have beenfacilitated by liberal policies of the Government that

provides easy market access for telecom equipment and afair regulatory framework for offering telecom services tothe Indian consumers at affordable prices.

Presently, all the telecom services have been opened forprivate participation. The Government has taken following

main initiatives for the growth of the Telecom Sector:

Lib li ti f I di


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Liberalization The process of liberalization in the country began in

the right earnest with the announcement of the NewEconomic Policy in July 1991.

Telecom equipment manufacturing was delicensed in1991 and value added services were declared open tothe private sector in 1992, following which radiopaging, cellular mobile and other value added services

were opened gradually to the private sector. This has resulted in large number of manufacturing

units been set up in the country.

Liberali ation of Indian


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As a result most of the equipment used in

telecom area is being manufactured within

the country.

A major breakthrough was the clearenunciation of the governments intention of

liberalizing the telecom sector in the National

Telecom Policy resolution of 13th May 1994.



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National Telecom Policy 1994 In 1994, the Government announced the National Telecom

Policy which defined certain important objectives, includingavailability of telephone on demand, provision of worldclass services at reasonable prices, improving Indias

competitiveness in global market and promoting exports,attractive FDI and stimulating domestic investment,ensuring Indias emergence as major manufacturing /export base of telecom equipment and universal availabilityof basic telecom services to all villages.

It also announced a series of specific targets to be achievedby 1997.



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Telecom Regulatory Authority of India (TRAI) The entry of private service providers brought with it

the inevitable need for independent regulation.

The Telecom Regulatory Authority of India (TRAI) was,thus, established with effect from 20th February 1997by an Act of Parliament, called the Telecom RegulatoryAuthority of India Act, 1997, to regulate telecomservices, including fixation/revision of tariffs for

telecom services which were earlier vested in theCentral Government.



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TRAIs mission is to create and nurture conditions forgrowth of telecommunications in the country in mannerand at a pace, which will enable India to play a leading rolein emerging global information society.

One of the main objectives of TRAI is to provide a fair and

transparent policy environment, which promotes a levelplaying field and facilitates fair competition.

In pursuance of above objective TRAI has issued from timeto time a large number of regulations, orders and directivesto deal with issues coming before it and provided the

required direction to the evolution of Indian telecommarket from a Government owned monopoly to a multioperator multi service open competitive market.



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The directions, orders and regulations issued cover a widerange of subjects including tariff, interconnection andquality of service as well as governance of the Authority.

The TRAI Act was amended by an ordinance, effective from24 January 2000, establishing a Telecommunications

Dispute Settlement and Appellate Tribunal (TDSAT) to takeover the adjudicatory and disputes functions from TRAI.

TDSAT was set up to adjudicate any dispute between alicensor and a licensee, between two or more serviceproviders, between a service provider and a group of

consumers, and to hear and dispose of appeals against anydirection, decision or order of TRAI.



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New Telecom Policy 1999 The most important milestone and instrument of telecom

reforms in India is the New Telecom Policy 1999 (NTP 99).

The New Telecom Policy, 1999 (NTP-99) was approved on26th March 1999, to become effective from 1st April 1999.

NTP-99 laid down a clear roadmap for future reforms,contemplating the opening up of all the segments of thetelecom sector for private sector participation.

It clearly recognized the need for strengthening the

regulatory regime as well as restructuring the departmentaltelecom services to that of a public sector corporation so asto separate the licensing and policy functions of theGovernment from that of being an operator.



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It also recognized the need for resolving the prevailingproblems faced by the operators so as to restore theirconfidence and improve the investment climate.

Key features of the NTP 99 include:

Strengthening of Regulator. National long distance services opened to private

operators.

International Long Distance Services opened toprivate sectors.

Private telecom operators licensed on a revenuesharing basis, plus a one-time entry fee. Resolution ofproblems of existing operators envisaged



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National Long Distance National Long Distance opened for private

participation.

The Government announced on 13.08.2000the guidelines for entry of private sector inNational Long Distance Services without anyrestriction on the number of operators.

The DOT guidelines of license for the NationalLong Distance operations were also issued.



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Highlights - NLD Guidelines Unlimited entry for carrying both inter-circle and

intra-circle calls.

Total foreign equity (including equity of NRIs andinternational funding agencies) must not exceed74%. Promoters must have a combined net worthof Rs.25 million.

Private operators will have to enter into an

arrangement with fixed-service providers within acircle for traffic between long-distance and short-distance charging centers.



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International Long Distance In the field of international telephony, India had agreed

under the GATS to review its opening up in 2004. However,open competition in this sector was allowed with effectfrom April 2002 itself. There is now no limit on the number

of service providers in this sector. The licence for ILD service is issued initially for a period of

20 years, with automatic extension of the licence by aperiod of 5 years.

The applicant company pays one-time non-refundableentry fee of Rs.25 million plus a bank guarantee of Rs.250million, which will be released on fulfillment of the roll outobligations.



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The annual licence fee including USO contribution is @6% of the Adjusted Gross Revenue and the fee/royaltyfor the use of spectrum and possession of wirelesstelegraphy equipment are payable separately.

At present 24 ILD service providers (22 Private and 2Public Sector Undertaking) are there.

As per current roll out obligations under ILD license,the licensee undertakes to fulfill the minimum network

roll out obligations for installing at least one GatewaySwitch having appropriate interconnections with atleast one National Long Distance service licensee.



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There is no bar in setting up of Point of

Presence (PoP) or Gateway switches in

remaining location of Level I Taxs. Preferably,

these PoPs should conform to Open NetworkArchitecture (ONA) i.e. should be based on

internationally accepted standards to ensure

seamless working with other CarriersNetwork.



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Universal Service Obligation Fund Another major step was to set up the Universal Service

Obligation Fund with effect from April 1, 2002.

An administrator was appointed for this purpose.

Subsequently, the Indian Telegraph (Amendment) Act,2003 giving statutory status to the Universal ServiceObligation Fund (USOF) was passed by both Houses ofParliament in December 2003.

The Fund is to be utilized exclusively for meeting the

Universal Service Obligation and the balance to thecredit of the Fund will not lapse at the end of thefinancial year.



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Credits to the Fund shall be throughParliamentary approvals.

The Rules for administration of the Fund

known as Indian Telegraph (Amendment)Rules, 2004 were notified on 26.03.2004.



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The resources for implementation of USO are raisedthrough a Universal Service Levy (USL) which has presentlybeen fixed at 5% of the Adjusted Gross Revenue (AGR) of allTelecom Service Providers except the pure value addedservice providers like Internet, Voice Mail, E-Mail service

providers etc. In addition, the Central Govt. may also give grants and

loans.

An Ordinance was promulgated on 30.10.2006 as the IndianTelegraph (Amendment) Ordinance 2006 to amend the

Indian Telegraph Act, 1885 in order to enable support formobile services, broadband connectivity, generalinfrastructure and pilot project for new technologicaldevelopments in rural and remote areas of the country.



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Subsequently, an Act has been passed on29.12.2006 as the Indian Telegraph (Amendment)Act 2006 to amend the Indian Telegraph Act,1885.

USFO has initiated action to bring mobile serviceswithin the ambit of Universal Service ObligationFund (USOF) activities.

Under this initiative, 7387 mobile infrastructuresites are being rolled out, in the first phase,across 500 districts and 27 states of India.



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This scheme will provide mobile services toapproximately 0.2 million villages which where

hitherto deprived of the same.

As on 30th June 2010, 7183 shared towers havebeen set up under the First Phase of the scheme.

The USOFof DOT has proposed to set up about

10,128 additional towers in order to extend themobile coverage in other uncovered areas under

the Second Phase of the Scheme.



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Unified Access Services Unified access license regime was introduced in November2003.

Unified Access Services operators are free to provide, within theirarea of operation, services, which cover collection, carriage,transmission and delivery of voice and/or non-voice messages overLicensees network by deploying circuit, and/or packet switchedequipment.

Further, the Licensee can also provide Voice Mail, Audiotexservices, Video Conferencing, Videotex, E-Mail, Closed User Group(CUG) as Value Added Services over its network to the subscribersfalling within its service area on non-discriminatory basis.

The country is divided into 23 Service Areas consisting of 19Telecom Circle and 4 Metro Service Areas for providing UnifiedAccess Services (UAS).



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The licence for Unified Access Services is issued on non-exclusive basis, for a period of 20 years, extendable by 10years at one time within the territorial jurisdiction of alicensed Service Area.

The licence Fee is 10%, 8% & 6% of Adjusted Gross Revenue

(AGR) for Metro and Category `A, Category `B andCategory `C Service Areas, respectively. Revenue and thefee/royalty for the use of spectrum and possession ofwireless telegraphy equipment are payable separately.

The frequencies are assigned by WPC wing of the

Department of Telecommunications from the frequencybands earmarked in the applicable National FrequencyAllocation Plan and in coordination with various userssubject to availability of scarce spectrum.



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Internet Service Providers (ISPs) Internet service was opened for private participation in 1998 with a

view to encourage growth of Internet and increase its penetration.

The sector has seen tremendous technological advancement for aperiod of time and has necessitated taking steps to facilitate

technological ingenuity and provision of various services. The Government in the public interest in general, and consumer

interest in particular, and for proper conduct of telegraph andtelecom services has decided to issue the new guidelinesfor grantof licence of Internet services on non-exclusive basis.

Any Indian company with a maximum foreign equity of 74% is

eligible for grant of license.



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Broadband Policy 2004 Recognizing the potential of ubiquitous Broadband service

in growth of GDP and enhancement in quality of lifethrough societal applications including tele-education, tele-medicine, e-governance, entertainment as well as

employment generation by way of high-speed access toinformation and web based communication; Governmenthas announced Broadband Policy in October 2004.

The main emphasis is on the creation of infrastructurethrough various technologies that can contribute to the

growth of broadband services. These technologies includeoptical fibre, Asymmetric Digital Subscriber Lines (ADSL),cable TV network; DTH etc.



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Broadband connectivity has been defined as Always On with theminimum speed of 256 kbps.

It is estimated that the number of broadband subscribers would be20 million by 2010.

With a view to encourage Broadband Connectivity, both outdoor

and indoor usage of low power Wi-Fi and Wi-Max systems in 2.4GHz-2.4835 GHz band has been delicensed.

The use of low power indoor systems in 5.15-5.35 GHz and 5.725-5.875 GHz bands has also been delicensed in January 05.

The SACFA/WPC clearance has been simplified.

The setting up of National Internet Exchange of India (NIXI) wouldenable bringing down the international bandwidth costsubstantially, thus making the broadband connectivity moreaffordable.



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The prime consideration guiding the Policyincludes affordability and reliability of

Broadband services, incentives for creation of

additional infrastructure, employmentopportunities, induction of latest

technologies, national security and brings in

competitive environment so as to reduceregulatory interventions.



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By this new policy, the Government intends to make availabletransponder capacity for VSAT services at competitive rates aftertaking into consideration the security requirements.

The service providers permitted to enter into franchisee agreementwith cable TV network operators.

However, the Licensee shall be responsible for compliance of theterms and conditions of the license.

Further in the case of DTH services, the service providers permittedto provide Receive-Only-Internet Service.

The role of other facilitators such as electricity authorities,Departments of ITs of various State Governments, Departments of

Local Self Governments, Panchayats, Departments of Health andFamily Welfare, Departments of Education is very important tocarry the advantage of broadband services to the users particularlyin rural areas.



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Target has been set for 20 million broadband connections by 2010and providing Broadband connectivity to all secondary and highersecondary schools, public health institutions and panchayats by2010.

In rural areas, connectivity of 512 KBPS with ADSL 2 plus technology(on wire) will be provided from about 20,000 existing exchanges in

rural areas having optical fibre connectivity. Community Service Centres, secondary schools, banks, health

centres, Panchayats, police stations etc. can be provided with thisconnectivity in the vicinity of above-mentioned 20,000 exchanges inrural areas. DOT will be subsidizing the infrastructure cost of

Broadband network through support from USO Fund to ensure thatBroadband services are available to users at affordable tariffs.



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Tariff Changes The Indian Telecom Sector has witnessed major

changes in the tariff structure.

The Telecommunication Tariff Order (TTO) 1999, issued

by regulator (TRAI), had begun the process of tariffbalancing with a view to bring them closer to the costs.

This supplemented by Calling Party Pay (CPP),reduction in ADC and the increased competition, has

resulted in a dramatic fall in the tariffs. ADC has been abolished for all calls w.e.f. 1st October

2008.



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The peak National Long Distance tariff for above1000 Kms. in 2000 has come down from US$ 0.67per minute to US$ 0.02 per minute in 2009.

The International Long Distance tariff from US$

1.36 per minute in 2000 to US$ 0.16 per minutein 2009 for USA, Canada & UK.

The mobile tariff for local calls has reduced fromUS$0.36 per minute in 1999 to US$ 0.009 - US$

0.04 per minute in 2009. The Average Revenue Per User of mobile is

between US$ 5.06 - US$ 7.82 per month



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Foreign Direct Investment (FDI) In Basic, Cellular Mobile, Paging and Value

Added Service, and Global Mobile Personal

Communications by Satellite, Composite FDIpermitted is 74% (49% under automatic route)subject to grant of license from Department ofTelecommunications subject to security and

license conditions. (para 5.38.1 to 5.38.4 ofconsolidate FDI Policy circular 1/2010 of DIPP)



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iberali ation of IndianTelecommunication Sector

FDI upto 74% (49% under automatic route) is also permitted forthe following: - Radio Paging Service

. Internet Service Providers (ISP's)

FDI upto 100% permitted in respect of the following telecom

services: - Infrastructure Providers providing dark fibre (IP Category I);

Electronic Mail; and

Voice Mail

Subject to the conditions that such companies would divest 26% of

their equity in favor of Indian public in 5 years, if these companieswere listed in other parts of the world



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Telecommunication Sector In telecom manufacturing sector 100% FDI is permitted

under automatic route.

The Government has modified method of calculation ofDirect and Indirect Foreign Investment in sector with caps(para 4.1 of consolidate FDI Policy circular 1/2010 of DIPP)

and have also issued guidelines on downstream investmentby Indian Companies. (para 4.6 of consolidate FDI Policycircular 1/2010 of DIPP)

Guidelines for transfer of ownership or control of Indiancompanies in sectors with caps from resident Indian

citizens to non-resident entities have been issued(para4.2.3 of consolidate FDI Policy circular 1/2010 of DIPP)



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Telecommunication Sector Investment Opportunities and Incentives An attractive trade and investment policy and lucrative

incentives for foreign collaborations have made India oneof the worlds most attractive markets for the telecomequipment suppliers and service providers.

No industrial license required for setting up manufacturingunits for telecom equipment.

- 100% Foreign Direct Investment (FDI) is allowed throughautomatic route for manufacturing of telecom equipments.

Payments for royalty, lumpsumfee for transfer oftechnology and payments for use of trademark/brandname on the automatic route.



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Telecommunication Sector

Foreign equity of 74% (49 % under automaticroute) permitted for telecom services - basic,

cellular mobile, paging, value added services,

NLD, ILD, ISPs - and global mobile personalcommunications by satellite

Full repatriability of dividend income and

capital invested in the telecom sector.



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Telecommunication Sector Network Expansion The telecom sector has shown robust growth during the past few

years.

It has also undergone a substantial change in terms of mobileversus fixed phones and public versus private participation.

The number of telephones has increased from 54.63 million as on31.03.2003 to 621.28 million as on 31.03.2010.

Wireless subscribers increased from 13.3 million as on 31.03.2003to 584.32 million as on 31.03.2010.

Whereas, the fixed line subscribers decreased from 41.33 million in31.03.2003 to 36.95 million in 31.03.2010.

The broadband subscribers grew from a meager 0.18 million to 8.76million as on 31.03.2010.



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Trend in Tele-density Tele-density in the country increased from 5.11%

in 2003 to 52.74 % in March 2010.

In the rural area teledensity increased from1.49% in Mar 2003 to 24.31% in March 2010 and

in the urban areas it is increased from 14.32% in

Mar 2003 to119.45% in March 2010. This indicates a rising trend of Indian telecom

subscribers.



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Rural Telephony Apart from the 200.77million fixed and WLL

connections on March 2010 provided in the ruralareas, 570000 uncovered VPTs have been

provided as on March 2010. Thus, 96% of the villages in India have been

covered by the VPTs. More than 3 lakh PCOs arealso providing community access in the rural

areas. Further, Mobile Gramin Sanchar SewakScheme (GSS) a mobile Public Call Office (PCO)service is provided at the doorstep of villagers.



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At present, 2772 GSSs are covering 12043villages.

Also, to provide Internet service, Sanchar Dhabas(Internet Kiosks) have been provided in more

than 3500 Block Headquarters out of the total6337 Blocks in the country.

The target of 80 million rural connections by 2010have already met during year 2008 itself.

USOF subsidy support scheme is also beingutilized for sharing wireless infrastructure in ruralareas with about 19,000 towers by 2010.



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Performance of telecom equipmentmanufacturing sector

As a result of Government policy, progress has

been achieved in the manufacturing oftelecom equipment in the country.

There is a significant telecom equipment-manufacturing base in the country and there

has been steady growth of the manufacturingsector during the past few years.



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Telecommunication Sector Rising demand for a wide range of telecom equipment,

particularly in the area of mobile telecommunication,has provided excellent opportunities to domestic andforeign investors in the manufacturing sector.

The last two years saw many renowned telecomcompanies setting up their manufacturing base inIndia.

Ericsson set up GSM Radio Base Station Manufacturingfacility in Jaipur. Elcoteq set up handset manufacturing

facilities in Bangalore. Nokia and Nokia SiemensNetworks have set up their manufacturing plant inChennai.



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LG Electronics set up plant of manufacturingGSM mobile phones near Pune. Ericsson

launched their R&D Centre in Chennai.

Flextronics set up an SEZ in Chennai. Othermajor companies like Foxconn, Aspcom,

Solectron etc have decided to set up their

manufacturing bases in India.



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The Government has already set up TelecomEquipment and Services Export Promotion

Council and Telecom Testing and Security

Certification Centre (TETC). A large number of companies like Alcatel, Cisco

have also shown interest in setting up their R&D

centers in India.

With above initiatives India is expected to be a

manufacturing hub for the telecom equipment.



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Opportunities India offers an unprecedented opportunity for

telecom service operators, infrastructure

vendors, manufacturers and associatedservices companies. A host of factors are

contributing to enlarged opportunities for

growth and investment in telecom sector:



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An expanding Indian economy with increasedfocus on the services sector

Population mix moving favorably towards ayounger age profile

Urbanization with increasing incomes

Investors can look to capture the gains of theIndian telecom boom and diversify their

operations outside developed economies that aremarked by saturated telecom markets and lowerGDP growth rates.



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Inflow of FDI into Indias telecom sector duringApril 2000 to Feb. 2010 was about Rs 405,460

million.

Also, more than 8 per cent of the approvedFDI in the country is related to the telecom

sector.



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Research & Development India has proven its dominance as a technology

solution provider. Efforts are being continuously madeto develop affordable technology for masses, as also

comprehensive security infrastructure for telecomnetwork.

Research is on for the preparation of testedinfrastructure for enabling interoperability in Next

Generation Network. It is expected that the telecom equipment R & D shall

be doubled by 2010 from present level of 15%.



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Modern technologies inductions are being promoted. Pilot projects on the existing and emerging

technologies have been undertaken including WiMax,3G etc.

Emphasis is being given to technologies havingpotential to improve rural connectivity.

Also to beef up R&D infrastructure in the telecomsector and bridge the digital divide, cellular operators,

top academic institutes and the Government of Indiatogether set up the Telecom Centres of Excellence(COEs).



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The main objectives of the COEs are as follows: Achieve Telecom Vision 2010 that stipulates a

definite growth model and take it beyond.

Secure Information Infrastructure that is vital for

countrys security. Capacity Building through Knowledge for a

sustained growth.

Support Planned Predictive Growth for stability.

Reduce Rural Urban Digital Divide to reach out tomasses



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Utilize available talent pool and create environment forinnovation.

Management of National Information Infrastructure(NII) during Disaster

Cater the requirement of South East Asia as RegionalTelecom Leader

To achieve these objectives seven Centre of Excellencesin various field of Telecom have been set up with the

support of Government and the participation ofprivate/public telecom operators as sponsors, at theselected academic institutions of India.



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3G & Broadband Wireless Services (BWA) The government has in a pioneering decision, decided

to auction 3G & BWA spectrum.

The broad policy guidelines for 3G & BWA have

already been issued on 1stAugust 2008 and allotmentof spectrum has been planned through simultaneouslyascending e-auction process by a specialized agency.

New players would also be able to bid thus leading to

technology innovation, more competition, faster rollout and ultimately greater choice for customers atcompetitive tariffs.



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The 3G will allow telecom companies to offer additionalvalue added services such as high resolution video andmulti media services in addition to voice, fax andconventional data services with high data rate transmissioncapabilities.

BWA will become a predominant platform for broadbandroll out services.

It is also an effective tool for undertaking social initiativesof the Government such as e-education, telemedicine, e-health and e-Governance.

Providing affordable broadband, especially to the suburbanand rural communities is the next focus area of theDepartment.



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BSNL & MTNL have already been allotted 3G &BWA spectrum with a view to ensuring early rollout of 3G & WiMax services in the country.

They will pay the same price for the spectrum as

discovered through the auction. While, Honble Prime Minister launched the

MTNLs 3G mobile services on the inauguralfunction of India Telecom 2008 held on 11th

December 2008, BSNL launched its countrywide3G services from Chennai, in the southern TamilNadu state on 22nd February 2009.



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Mobile Number Portability (MNP) Mobile Number Portability (MNP) allows subscribers to

retain their existing telephone number when theyswitch from one access service provider to another

irrespective of mobile technology or from onetechnology to another of the same or any other accessservice provider.

The Government has announced the guidelines for

Mobile Number Portability (MNP) Service License inthe country on 1st August 2008 and has issued aseparate License for MNP service w.e.f. 20.03.2009.



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The Department of Telecommunication (DoT)has already issued licences to two global

companies (M/s Syniverse Technologies Pvt.

Ltd. and M/s MNP Interconnection TelecomSolutions India Pvt. Ltd.) for implementing the

service. MNP is to be implemented in whole

country in one go by 31.10.2010



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Targets Set By the Government 1. Network expansion 800 million connections by the year 2012.

. Rural telephony 200 million rural subscribers by 2012

Reduce urban-rural digital divide from present 25:1 to 5:1 by 2010. 3. Broadband 20 million Broadband connections by 2010

Broadband with minimum speed of 1 mbps.

Broadband coverage for all secondary & higher secondary schools

and public health care centres by the end of year 2010. Broadband coverage for all Grampanchayats by the year 2010

Broadband on demand is every village by 2012



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4. Manufacturing Making India a hub for telecom manufacturing by

facilitating more and more telecom specific SEZs.

Quadrupling production in 2010.

Achieving exports of 10 billion during 11th Five year plan.

5. Research & Development Pre-eminence of India as a technology solution provider.

Comprehensive security infrastructure for telecomnetwork.

Tested infrastructure for enabling interoperability in NextGeneration Network



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8. International Bandwidth Facilitating availability of adequate

international bandwidth at competitive prices

to drive ITES sector at faster growth.


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Information Technology SectorModule III

Liberalization of Indian Information


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Technology Sector

The Indian Information Technology sector can beclassified into the following broad categories - ITServices, Engineering Services, ITES-BPO Servicesand E Business

IT Services can further be categorized intoInformation Services (IS) outsourcing, packagedsoftware support and installation, systemsintegration, processing services, hardwaresupport and installation and IT training andeducation



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Technology Sector

Engineering Services include Industrial Design,Mechanical Design, Electronic System Design(including Chip/Board and Embedded SoftwareDesign), Design Validation Testing,

Industrialization and Prototyping IT Enabled Services are services that use telecom

networks or the Internet.

For example, Remote Maintenance, Back OfficeOperations, Data Processing, Call Centers,Business Process Outsourcing, etc.



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Technology Sector

IT sector is attracting considerable interest notonly as a vast market but also as potential

production base by international companies.

Therefore India is considered as a pioneer insoftware development and a favorite

destination for IT-enabled services

Liberalization of Indian Informationh l


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Technology Sector

The rapid growth in the sector is a consequenceof access to trained English speakingprofessionals, cost competitiveness and qualitytelecommunications infrastructure.

Companies operating from India are able toleverage the advantage of the Indian time zoneto offer 24 x 7 services to their global customers.

Several world leaders including General Electric,British Airways, American Express, and Citibank,have outsourced call centre operations to India.

Liberalization of Indian Informationh l


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Technology Sector

E Business (electronic business) is carrying outbusiness on the Internet; it includes buying andselling, serving customers and collaborating withbusiness partners.

The following are some of the strengths of theIndian IT sector:

Highly skilled human resource;

Low wage structure;

Quality of work;

Liberalization of Indian Informationh l S


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Technology Sector

Initiatives taken by the Government (setting upHi-Tech Parks and implementation of e-governance projects);

Many global players have set-up operations in

India like Microsoft, Oracle, Adobe, etc.; Following Quality Standards such as ISO 9000, SEI

CMM etc.;

English-speaking professionals;

Cost competitiveness; Quality telecommunications infrastructure

Liberalization of Indian InformationT h l S


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Technology Sector

The following are some of the weaknesses ofthe sector:

Absence of practical knowledge;

Dearth of suitable candidates; Less Research and Development;

Contribution of IT sector to Indias GDP is still

rather small; IT development concentrated in a few cities only

Liberalization of Indian InformationT h l S


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Technology Sector

Regulatory Regime and Laws relating to the IT sector: Department of Information Technology (DIT):

This department which is under the Ministry ofCommunications and Information

Technology is responsible for the formulation,implementation and review of national policies in thefield of Information Technology including hardware andsoftware, standardization of procedures, internet, e-

commerce and information technology education anddevelopment of electronics

Liberalization of Indian InformationT h l S t


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Technology Sector

Initiatives for development ofHardware/Software industry including

knowledge based enterprises, measures for

promoting IT exports and competitiveness ofthe industry are looked after by the

Electronics Export and Computer Software

Promotion Council (ESC) and National

Informatics Centre (NIC) along with DIT



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Technology Sector

The Department of Information Technologyundertakes the following functions:

Policy matters relating to InformationTechnology; Electronics; and Internet (all matters

other than licensing of Internet Service Provider). Promotion of Internet, IT and IT enabled

services.

Assistance to other departments in the

promotion of E-Governance, Ecommerce, E-Medicine, E-Infrastructure, etc.



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Technology Sector

Promotion of Information Technologyeducation and Information

Technology-based education.

Matters relating to Cyber Laws, administrationof the Information

Technology Act. 2000 (21 of 2000) and other

IT related laws



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Technology Sector

Matters relating to promotion andmanufacturing of Semiconductor Devices inthe country; The Semiconductor IntegratedCircuits Layout Design Act, 2000 (37 of 2000).

Interaction in IT related matters withInternational agencies and bodies e.g. Internetfor Business Limited (IFB), Institute for

Education in Information Society (IBI) andInternational Code Council - on line (ICC).



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Technology Sector

Initiative on bridging the Digital Divide:Matters relating to Media Lab Asia.

Promotion of Standardization, Testing and

Quality in IT and standardization of procedurefor IT application and Tasks.

Electronics Export and Computer Software

Promotion Council (ESC). National Informatics Centre (NIC).



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Technology Sector

Initiatives for development of Hardware /Software industry including knowledge-based

enterprises, measures for promoting IT

exports and competitiveness of the industry. All matters relating to personnel under the

control of the Department



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Technology Sector

National Association of Software and ServicesCompany (NASSCOM):

NASSCOM acts as an advisor, consultant andcoordinating body for the IT-BPO industry in India, and

has played a key role in enabling the government inIndia to develop industry friendly policies. NASSCOMwas set up in 1988 to facilitate business and trade insoftware and services and to encourage advancementof research in software technology. It is a not-for-profitorganization, registered under the Indian Societies Act,1860

Liberalization of Indian InformationTechnology Sector


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Technology Sector

NASSCOM has been proactive in pushing this cause forensuring that the Indian Information Securityenvironment benchmarks with the best across theglobe.

As a part of its Trusted Sourcing initiative, NASSCOM is

in the process of setting up the Data Security Council ofIndia (DSCI) as a Self Regulatory Organization (SRO) toestablish, popularize, monitor and enforce privacy anddata protection standards for Indias ITeS-BPO industry.DSCI shall function as an enabler to the IT and ITeSindustry to grow at a rapid pace by facilitating theadoption and enforcement of the prescribed securitystandards and best practices



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Technology Sector

Information Technology Act, 2000: The legal enactment which governs the

process and dissemination of informationdigitally in India is the Information TechnologyAct, 2000.

The Act along with its Rules legalizes theacceptance of electronic records and digital

signatures providing a legal backbone to e-commerce.



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Technology Sector

The Indian Information Technology Actaddresses the following issues:

Legal Recognition of Electronic Documents;

Legal Recognition of Digital Signatures;

Offenses and Contraventions;

Justice Dispensation System for Cyber crimes



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Technology Sector

Government Initiatives: The Foreign Trade Policy 2004 - 2009 permits import of all

kinds of computers (except second hand computers) inIndia without any licenses.

In order to promote domestic investment, foreign direct

investment, transfer of technology / process know-how,technical collaboration, joint venture etc in India and exportIT software products and services from India to the globalmarket, both Government of India and State Governmentsin India have been offering a series of policy packages

including tax breaks, import duty concessions etc undervarious schemes which include:



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Technology Sector

Export Oriented Units (EOUs) Scheme: The purpose of the scheme was basically to boost

exports by creating additional production capacity.

Electronics Hardware Technology Parks (EHTPs):

Electronics Hardware Technology Park (EHTP)complexes can be set up by the Central Government,State Government, Public or Private SectorUndertakings or any combination thereof, dulyapproved by the Inter- Ministerial Standing Committee

(IMSC) in the Ministry of Communication andInformation Technology (Department of InformationTechnology).



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Technology Sector

Software Technology Parks (STPs): The Software Technology Parks of India (STPI)

have been set up by the Ministry of

Information Technology, Government of Indiaand the International Technology Park in a

joint project by the State Government



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Technology Sector

Special Economic Zone (SEZ) Scheme: SEZs arebeing set up to enable hassle freemanufacturing and trading for exportpurposes

Sales from Domestic Tariff Area (DTA) to SEZsare being treated as physical export.

This entitles domestic suppliers to Drawback/

DEPB benefits, CST exemption and Service Taxexemption



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Technology Sector

Certain exemptions like Income Tax exemptionon export profits is available to SEZ Units for 5

years, 50% for next 2 years and 50% of

ploughed back profits for 3 years thereafterare available for units in these designated

areas/zones



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Technology Sector

Export Promotion Capital Goods (EPCG)Scheme:

The EPCG Scheme allows import of capital

goods for pre-production, production andpostproduction (including CKD/SKD thereof)

at 5% customs duty subject to export

obligations



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Technology Sector

Units undertaking to export their entireproduction of goods and services may be set

up under the Export Oriented Unit (EOU)

Scheme, Electronic Hardware Technology Park(EHTP) Scheme or Software Technology Park

(STP) Scheme.



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Technology Sector

The Export Promotion Industrial Park, built nearInternational Technology Park, gives an exclusive288 acres of area for export oriented business.

GE has its India Technology Center located at this

park and employs hundreds of multi disciplinarytechnology development activities.

An industrial park, known as Electronic City wasset up in 1991 taking more than a hundred

electronic industries including Motorola, Infosys,Siemens, ITI, and Wipro, in an area of around 330acres



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Technology Sector

The IT Corridor project, conceptualized bySingapores Jurong Town Corporation Private

Ltd, was initiated by the Department of IT and

the Bangalore Development Authority in orderto develop state of the art facilities for the

development of knowledge based industries



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Technology Sector

Government initiatives for the ITes Sector: The government of India has already set up a

single-window facility for attracting foreign

direct investments in this sector. Recognizing the potential of this sector, the

government has provided many incentives

including a tax holiday up to 2010 andcompetitive duty structures



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Technology Sector

In addition to the central government incentives,respective state governments have also developedattractive incentive packages to target investors

The government is also actively trying to reduce

international communication cost. The telecommunications ministry has already started

phased liberalization programme.

In order to support IT-related services, the government

is providing some special incentives and is alsoproviding infrastructure support through organizationssuch as the Software Technology Parks (STP).



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Technology Sector

The government is also actively trying toreduce international communication cost.

The telecommunications ministry has alreadystarted phased liberalization programme.

In order to support IT-related services, thegovernment is providing some specialincentives and is also providing infrastructure

support through organizations such as theSoftware Technology Parks (STP).



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Technology Sector

Financial institutions and venture capitalists inthe country are willing to provide funds at

competitive rates for expansion in ITes

businesses. All these factors collectively create a number

of opportunities in the IT sector.



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Technology Sector

Market Trends: 1. Information Technology: The Information Technology (IT) sector in India is

amongst the fastest growing in the country and

the world. It is expected that by the year 2008, ITsoftware and services industry will account for 7per cent of Indias GDP and 35 per cent of totalexports.

The Indian domestic IT market grew by 29% inthe financial year 2007-08 to report revenues ofRs 288, 810 crore



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Technology Sector

The revenue of the information technologysector has grown from 1.2 per cent of the

gross domestic product (GDP) in FY 1998 to an

estimated 5.5 per cent in FY 2008. The net value added by this sector, to the

economy, is estimated to be 3.3 to 3.9 per

cent for FY 2008



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Technology Sector

The Indian IT-BPO sector grew by 33 per centin FY 2008 to reach US$ 64 billion in aggregate

revenue (including hardware).

Of this, the software and services segmentaccounted for US$ 52 billion, growing by 28

per cent over FY 2007



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Technology Sector

Software and services exports (includingexports of IT services, BPO, engineeringservices and R&D and software products)reached US$ 40.4 billion, contributing nearly

63 per cent to the overall IT-BPO revenueaggregate.

IT-BPO exports (including hardware exports)

grew by 28 per cent from US$ 31.8 billion inFY 2007 to US$ 40.9 billion in FY 2008



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Technology Sector

Domestic IT market (including hardware)reached US$ 23.1 billion in FY 2008 as againstUS$ 16.2 billion in FY 2007, a growth of 43 percent.

Hardware remained the largest segment ofthe domestic market with a growth rate of 44per cent in FY 2008.

Software and services spending grew by over41 per cent during the year.



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Technology Sector

The Indian IT services market is estimated toremain the fastest growing in the Asia-Pacific

region with a CAGR of 18.6 per cent.


Debate on Models of Development in India

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