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The Indian government aims for 100 million broadband subscribers by 2014, an ambitious target from the 13.1 million broadband subscribers in 2010. Increasing broadband Internet access will improve the business environment and benefit consumers by raising productivity and narrowing regional divides. However, significant challenges remain.

  • The use of mobile phones and Internet in India has increased dramatically. The proportion of Indian households with a mobile phone grew from 17.6% in 2005 to 37.3% in 2010. There has been an 869.0% increase in broadband subscribers over this time period, although household possession of a broadband Internet enabled computer was just 4.7% in 2010;
  • The growth in mobile phone ownership demonstrates that Indians are trying to join the global telecommunications revolution. According to the Telecom Regulatory Authority of India (TRAI) inflows of Foreign Direct Investment (FDI) into the telecommunications sector grew dramatically after 2002 when the government cut its stake in VSNL, the former long distance communications provider from 53% to 26%;
  • This coincides with real GDP growth averaging 8.1% annually in 2005-2010. Disposable incomes have also increased over 2005-2010 by 33.5% in real terms. There were 74.9 million Internet users in India in 2010.

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Implications

  • Better broadband infrastructure will contribute to extensive growth in the service and manufacturing sectors. Services contributed 26.0% to GDP in 2009 (latest year available);
  • Fast broadband connections would mean higher productivity, lower operating costs and higher profit margins for businesses. This would be very attractive to foreign investors seeking to use India as a lower cost base. FDI inflows are expected to bounce back from a fall of 14.4% in US$ terms in 2009 as the global recovery takes hold;
  • Increased mobile and Internet access helps reduce red tape, making it easier for consumers and governments to communicate. It would also provide opportunities for education, resulting in greater labour productivity gains, while rural areas will benefit from e-health initiatives and access to government services;
  • For businesses, greater broadband access could mean that registering the business, paying taxes, and filing legal forms online could result in less man hours wasted. India ranks low in the World Bank Doing Business survey in 2011, at 134 out of 183 countries;
  • The average consumer in India should benefit from increased Internet access as they will be able to obtain better information about availability and prices of goods and services;
  • Challenges to Internet usage expansion include low levels of GDP per capita on a PPP basis of I$3,535 in 2010, which may limit demand for broadband services, although gross incomes per capita are increasing;
  • Other challenges include building the infrastructure for such diverse geography. It is likely that the expansion of broadband will be dependent on increased mobile satellite technology.

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