The telecom tangle

February 25th, 2012

“Sorry you seem to have dialled a wrong number”; “Please check the number you have dialled”; “The dialled number does not exist” ……… and the list goes on and on.

For long, subscribers to cellular services in India have got used to hearing such automated messages the moment they make an error in dialling the number. The service provider took great pains to make it known to the subscriber that he has dialled a wrong number. But now it seems a large number of service providers have themselves dialled a wrong number. Surely for foreign telecom majors such as Telenor, Etisalat, Sistema etc., India has been a wrong number and they have already announced exit plans.

The above is a direct consequence of the judgement and is surely not the only consequence. The collateral consequences will now start and the dangerous ramifications of the judgement will be felt by a large number of sectors including but not limited to consumers, corporate, banks, telecom equipment vendors etc.

The least affected will be the large number of consumers who were availing services from providers whose license has been cancelled. According to industry estimates such consumers would total around 50 million. With number portability the woes of such consumers would be greatly reduced.

The worst fallout of the decision is the dent in investor confidence when it comes to the foreign players. In the aftermath, there is no doubt that the foreign investor will now think twice before entering a regulated sector in India. The foreign players have a valid argument – they argue that the apex court has passed the decision of cancelling the licenses whilst the corruption case is still to be decided (read A Raja and the CBI case). If the corruption case, as made out by the government, fails (going by the past rate of success in getting convictions for the politicians in corruption cases, failing is more likely), will the apex court reverse its decision of cancelling the licenses. Further, they argue that even if the licenses were issued by causing a loss of exchequer, the court could have asked the existing players to make good such notional loss. Cancellation of the licenses has created total confusion in the industry. No body is clear as to what will happen to the gains which have already accrued to the India players in the course of selling the licenses to the foreign players. The Damocles sword is still hanging over the equipment vendors and banks that have exposures to this industry. It is fast appearing that the practical roll out of the decision is beset with problems.

There is every possibility that at the end of the day we may feel that the hon’ble lordhips at the apex court in their quest to deliver solutions to a issue problem have created more problems than they have managed to resolve.

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Per capita income crosses Rs 50,000 – HURRAY!

February 1st, 2012

If India’s recent economic growth experience has been less spectacular than China’s, it has still been extremely impressive by the standards of most other developing countries in the same period and in comparison to its own past. This is, by and large, the opinion that has been doing the rounds across the globe ever since the “economic reforms” started in the country two decades ago. Data released yesterday shows that for the first time the per capita income at current prices is estimated at Rs 53,331 in 2010-11, against Rs 46,117 for the previous year, depicting a growth of 15.6%.

This huge increase is bound to be used in countless presentations, talks etc. by the policy planners as a showcase for the success of the economic policies being pursued by the nation. There is no doubt that this is an impressive achievement but it should not be used to draw any conclusions. The figure surely gives an idea of the standard of living of the people, though much of the growth in income may have been driven by the richest Indians – which is a fact. And it is this fact which is the reality of the country. Growth in GDP, per capita income etc are the indicators which reflect on the income poverty of the country and India is doing fairly well on these measures. However, the real well-being of a nation needs to be measured by human poverty indicators and not the income poverty indicators.

Human poverty indicators in India suggest a totally reverse picture of the economy. India has never been a good performer in human development terms. Overall, both health and education indicators (one of the best measures of human poverty) have lagged well below those in other countries at similar levels of development and with similar per capita incomes. A few weeks back the prime minister had released a report on the extent of child malnutrition in India and the outcomes of the report forced him to term the malaise of child malnutrition as a national shame. Recent data released by the UN has placed India as the worst performer in child mortality sex ratio, even worse than its neighbours like Sri Lanka and Pakistan. A recent report on inequality released by OECD mentioned that income inequalities have gown in India over the last two decades. In fact none of the reports cited above are contrary to the ground realities in India.

It is a paradoxical situation, the income indicators and the human indicators show divergent outcomes. The benefits of the income growth have not impacted the human indicators. Clearly, increasing inequality is an important factor, since it has meant that the benefits of the growth have been concentrated and have not “trickled down” (a.k.a top-down approach) sufficiently to ensure improved consumption among the lower income groups. The policy planner should not forget that the common man is benefitted only when the income growth impacts his daily life. In fact, it seems that the government has lost total connect with the common man who is supposed to be the ultimate beneficiary of all income growth.

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