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Impact of FDI in the Telecommunication Sector of India

Impact of FDI in the Telecommunication Sector of India

The most impactful contributors to India’s booming economy are developing the service sector and the role of foreign direct investment or FDI in telecommunications.

Since the last two decades, the service sector’s rapid expansion has played an increasingly important role in national and international economies. Large shares of production and employment in most economies around the world are due to the services.

Their share in world trade and investment has also been increasing. The rapid growth of the service sector resulted in India becoming one of the fastest-growing economies in the 1990s.

The worldwide structure of Foreign Direct Investment (FDI) has also moved towards services. In the early 1970s, accountability of the service sector was towards only one-quarter of the world stock of the FDI.

In 1990, these shares were less than one-half, and by 2003, they had increased to approximately 67 percent. Currently, the prominent industries in the service sector are telecommunication, IT-enabled services, electricity insurance, and air transport.

A lot of services are neither tradable nor storable but should be produced where they are being consumed. FDI is the means of delivering them dominantly to foreign markets, states United Nations Conference on Trade, Aid, and Development (UNCTAD). As a different sector, FDI can provide capital, technology, and managerial knowledge and enhance skills in the form of services.

The introduction of “Manmohanomics” during the rule of the government of PV Narasimha Rao in 1991 has brought the image of foreign direct investment as a tool for transforming developed countries into advanced nations. Since then, the expansion of foreign direct investment has been encouraged by the government.

The liberalization measures have changed with foreign direct investments radically post-1990. Now the portfolio, along with the foreign direct investment, is allowed and actively encouraged.

Foreign Direct Investment was initially introduced only in a few sectors, but since then, it has been introduced in a variety of sectors, including the telecommunications sector. Multi-faceted advantages of encouraging foreign direct investment in the telecom sector are there.

Multiple benefits will be allowed by the inflows, such as technology transfer, market access, improvements in the quality of data, and organizational skills.

The flow of foreign currency is increased, which helps in maintaining harmony with the country with whom the investment is made. Additionally, India offers unprecedented opportunities for the operators of telecom services, vendors of infrastructure, manufacturers, and companies offering associated services.

When cellular telephony was opened up by the Indian government to the private industry, a lot of foreign investors were ready to enter the telecom sector of India. However, Indian telecom has attracted the major flow of FDI since August 1991 after beating other sectors of manufacturing and services.

According to the statistics published by an online agency tracking the development in the Telecom sector of India, actual FDI worth Rs 9576.40 Crore had been grossed by Indian Telecom during the period beginning from late 1991 to early 2003. The major share of the total inflow of FDI in the telecom sector of India has gone towards investment in holding companies which are followed by cellular networks, manufacturing, and consultancy.

About FDI India

We at FDI India, help to simplify the complex structure of foreign investments and transactions under FDI with expertise achieved by years of experience in fieldwork. Our objective is to transform the face of the facilitation services of FDI in the country by focusing on sustainable investments or loans such as FDI in telecommunications which will help Indian businesses.

FDI India is transforming the investment climate of the country by simplifying the business environment for its investors. Its experts specialize across different Indian states and sectors, handholding investors throughout their investment lifecycle from pre-investment to after-care.

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