Desperate times need desperate measures. As the country seems to be getting stuck with twin deficits, the Government finally seems to be giving way to reforms. The latest instance of this was seen in the telecom sector that has been mired in spectrum controversies in the last few years. In a recent move, the Telecom Commission has increased the FDI limit in the sector from 74% to 100%. Of this, 49% will be through the automatic route, while FIPB nod will be needed for further stake. The move is a shot in the arm of domestic telecom sector that seems to have entered a mature phase in the business cycle.
The new regulation is expected to attract foreign players in the sector. So far, the latter were forced to rely on domestic partners to operate in India. The move will also give the debt ridden domestic telecom sector access to foreign funds to retire their debt. With more players in the sector, we expect the competition and quality of services to improve as well. In short, it seems to be a win win policy for all stakeholders, consumers included.
However, the decision is yet to get the Cabinet approval. We expect it to face opposition due to national security concerns. Further, before such a move attracts foreign players, there are lots of issues that need to be addressed. These include clarity on policies related to taxation, mergers and acquisition and spectrum in the telecom sector. It should be noted that for similar reasons, the much hyped FDI in multi brand retail reform has not attracted foreign players. We hope that government will learn lessons from the past and the telecom sector will not witness a similar logjam.
The new regulation is expected to attract foreign players in the sector. So far, the latter were forced to rely on domestic partners to operate in India. The move will also give the debt ridden domestic telecom sector access to foreign funds to retire their debt. With more players in the sector, we expect the competition and quality of services to improve as well. In short, it seems to be a win win policy for all stakeholders, consumers included.
However, the decision is yet to get the Cabinet approval. We expect it to face opposition due to national security concerns. Further, before such a move attracts foreign players, there are lots of issues that need to be addressed. These include clarity on policies related to taxation, mergers and acquisition and spectrum in the telecom sector. It should be noted that for similar reasons, the much hyped FDI in multi brand retail reform has not attracted foreign players. We hope that government will learn lessons from the past and the telecom sector will not witness a similar logjam.
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