EDITORIAL : THE HINDU, INDIA

Renewing the telecom agenda

When it comes to telecommunication gadgets, obsolescence is measured in months rather than years, not to mention decades. That was not the case with governance in the telecom industry, considering that the Indian Telegraph Act of 1885 is still the law that applies to the use of telephones, telegraph, and communications across the land. But the 2G scam has laid bare the disastrous consequences of persisting with an outdated and ambiguous policy framework, which a succession of Telecommunications Ministers handled questionably and which A. Raja used to scandalous effect, resulting in the biggest scam in the history of independent India. It is not difficult to see why this industry needs a periodically fine-tuned policy regime. India's telephone-using population is swelling phenomenally: it took a hundred years for the number of telephone subscribers to touch 20 million; now 20 million subscribers are added every month. The mode of connectivity has changed: 96 per cent of the 826 million subscribers use mobiles, which were unseen just 16 years ago. Indeed, even among the wireless services that became available in the 1990s, pagers and mobile radio trunking phones, which ranked quite prominently in the New Telecom Policy of 1999, have passed into oblivion. The value of the wireless spectrum has skyrocketed in consonance with the number of subscribers connected.

It is hardly surprising that post-scam, Telecommunications Minister Kapil Sibal wants to draft a new telecom policy to replace the one that was set 12 years ago. Mr. Sibal does not have some of the challenges NTP 1999 faced, especially the challenge of increasing the tele-density in the country. The industry has over-delivered on targets, with 154 phones today for 100 people in urban areas and 30 phones (against a target of four) for every 100 people in rural India. But Mr. Sibal needs skillfully to draft the policy in a manner that will let consumers continue to enjoy the benefits of low tariffs and of access to the latest technologies. Ensuring that there is a sufficient number of service providers competing in each area will take care of the former. Mr. Sibal has talked of having a minimum of six, but that is no problem for now since most areas have almost twice that number of service providers. He has also talked of granting a unified licence, which one trusts will be agnostic to technology choice. This will be crucial in letting companies offer their subscribers the benefit of technology as it changes and improves. But the more intractable issue will be that of spectrum and its pricing, given the proliferation of mobile devices and the increased demand on the air waves. Mr. Sibal wants to separate the issue of the telecom licence from the grant of spectrum. Yet that does not solve the problem fully. Since spectrum is commonly owned but scarce, a transparent mechanism must be devised to let phone companies pay the appropriate price to the government for the slices they use. That was the issue that trapped Mr. Raja; let not his successors also trip on it.

Realistic assessment of trade

The impressive trade performance during 2010 helped in no small way in checking the global economy's slide into recession. Highlighting this and certain related aspects, the World Trade Organisation in a recent report has cautioned that expectations of trade growth in 2011 ought to be more subdued. After the record-breaking 14.5 per cent surge in terms of volume in 2010, the expansion in world trade is unlikely to exceed 6.5 per cent during 2011. In 2010, trade was essentially bouncing back from the sharp drop of almost 12 per cent during the previous year. The 14.5 per cent increase was the highest since 1950 and was buoyed by a 3.6 per cent growth in the global output. Such a performance returned trade to the 2008 peak. The WTO's muted expectations are rooted in the realisation that the “hangover from the financial crisis is still with us.” High unemployment in the developed economies and sharp belt-tightening in Europe have fuelled protectionist pressures. The Doha development round shows no signs of moving forward. The earthquake, the tsunami, and the nuclear disaster in Japan have added to the uncertainty surrounding the trade outlook while the spiralling prices of commodities, especially petroleum, and the continuing unrest in major oil exporting countries have added to the risk factors.

But that is not all, according to the WTO. The factors that contributed to the unusually large drop in world trade in 2009 may have also boosted the rebound in 2010. The proliferation of global supply chains is one factor. The product composition of trade compared with output is another. Global supply chains cause goods to move across national boundaries several times during the production process, thereby increasing measured trade flows. Certain goods such as consumer durables and industrial machinery, which were severely affected during the downturn, have a larger share in world trade than in global GDP. Consequently, while they exaggerated the magnitude of trade slump relative to the GDP in 2009, they had a positive effect the next year. The trade recovery needs to be sustained by sound policy measures. Exhorting its members to be vigilant against protectionist forces, the WTO has said that salvation lies in opening, not closing, markets.