Economic Survey Hints at Jio as a Disruptor in Stressed Telecom Sector

New Delhi: The Economic Survey has highlighted major hurdles for the telecom sector and talked of a disruptive entry without naming Reliance Jio.

"A new entrant has disrupted the market with low-cost data services and the revenue of incumbent players has fallen. The crisis has also severely impacted investors, lenders, partners and vendors of these telecom companies," said the Survey prepared by Chief Economic Advisor (CEA) Arvind Subramanian and his team.

“It is important to note that the telecom sector is going through a stressful period with growing losses, debt pile, price war, reduced revenue and irrational spectrum costs," the Survey said, adding that it had cautioned of the situation in the last survey as well.

While highlighting reduced revenue and irrational spectrum costs, the report also said that the 'crisis' being faced by telecom companies has also deeply impacted their investors, lenders, partners, and vendors, even as it underscored government programmes of ‘Bharat Net’ and ‘Digital India’ that were enabling India to become digitally connected.

Reliance Jio started offering free data and voice calls from September 5, 2016, and since then has been able to garner a subscriber base of more than 160 million users as of December 2017.

The company in last quarter results turned profitable for the first time with a net profit of 25 percent.

Among other important observations in the infrastructure space, the Survey notified that India will be needing about $4.5 trillion in the next 25 years for infrastructure development, of which it will be able to garner about $3.9 trillion.

"The Global Infrastructure Outlook reflects that rising income levels and economic prosperity is likely to further drive demand for infrastructure investment in India over the next 25 years. Around $4.5 trillion worth of investments are required by India till 2040 to develop infrastructure to improve economic growth and community well being," the Survey said.

It said the current trend shows that India can meet around $3.9 trillion infrastructure investment out of $4.5 trillion. "The cumulative figure for India's infrastructure investment gap would be around $526 billion by 2040," it said.

The Survey stressed the need to fill the infrastructure investment gap by financing from private investment, institutions dedicated for infrastructure financing like National Infrastructure Investment Bank (NIIB) and also global institutions like Asian Infrastructure Investment Bank (AIIB) and New Development Bank (erstwhile BRICS Bank).

The Survey said all-India installed power generation capacity has increased substantially over the years and reached 330860.6 MW as on November 30, 2017.

About logistics sector, the Survey highlighted that "the Indian logistics market is expected to reach about $215 billion in 2020, growing at a CAGR of 10.5 per cent".

For the telecom sector, it said under phase II of ‘Bharat Net’ to connect 1.5 lakh gram panchayats with high-speed broadband is likely to be completed by March 2019.