The Liberalization of India's Telecommunications Sector: Implications for Trade and Investment

India's telecommunication sector has undergone a spectacular transformation during the last decade emerging from a highly regulated, stat-owned monopoly to a moderately competitive fairly deregulated sector. Today, India possesses the world's fifth largest public sector telecommunications network and Asia's third larges, behind only China and South Korea. India's telecommunications sector continues to grow at a rapid pace and government officials, regardless of party, acknowledge that India needs a modern telecommunications network to sustain high levels of economic growth and create the proper environment for its IT sector to grow and prosper. Given its size and population, India possesses one of the most under penetrated and least developed telecommunications services markets in the world. India's fixed-line service sector has suffered from decades of under investment, the absence of competition, government protection, and monopoly. Much of the country's telecommunications infrastructure is archaic by international standards and the introduction of new technologies has rendered it obsolete. By the late 1980s, recurring fiscal deficits and negative balances of payments encourage the Indian government to initiate an economic reforms ended the government's monopoly over telecommunications services and in the manufacture of telecommunications equipment and opened the sector to private sector participation and foreign investment. Many of the world's leading multinational telecommunications firms have been drawn to India because of its enormous market potential. The opening of the telecommunications sector created one of the fastest growing and hottest markets for equipment and services in the world. Today vendors from the United States and other countries dominate India's $12.3 billion annual equipment market. To meet the ambitious goals set by the government in the National Telecom Policy of 1994 and 1999, India will need to install approximately 250 million telephones by 2010 at a cost of $106 billion. Most of the funds needed for the expansion are expected to come from the United States and other foreign investors.