
The Indian telecom sector is a key driver of the Indian economy, contributing about 6 per cent to India’s GDP. It is the world's second largest, with a subscriber base of 1,203.69 million, high data consumption, and ongoing expansion into 5G services and beyond. Yet, it faces several challenges which is not only slowing down its growth but also holding it back from becoming the top global player.
With the Union Budget 2025-26 around the corner, the telecom sector is expecting the government to create a more conducive environment which will not only help the sector grow and expand, but also help the operators take faster investment decisions and improve service quality.
On top of the agenda for the telecom operators is the high spectrum costs which is increasing their debt burden. This, coupled with low revenue realisation due to relatively lower average revenue per user (ARPU), is impeding investment in next-gen network infrastructure. The sector is expecting the government to reduce spectrum costs to reduce their debt burden.
At the same time, the industry has been long urging the government to rationalise taxes, and abolish the Universal Services Obligation Fund (USOF), apart from a reduction in Spectrum User Charges, and licence fees, to boost investment. The industry is also expecting some activity in reduction of license fees and removal of non-telecom revenues from the definition of Gross Revenue. Additionally, the existing moratorium on Adjusted Gross Revenue (AGR) dues has given the much-needed relief to operators with high debt levels. The industry expects the government to extend the moratorium to provide further relief to the operators.
With the Production Linked Incentive (PLI) scheme being extremely successful in terms of boosting domestic manufacture of telecom equipment, increased production, exports and job creation, the industry expects the government to increase budgetary allocation in this area. This will not only increase the independence of the Indian industry, but also position India as a global manufacturing hub. The allocation of funds along with policy intervention could take the pressure away from the local industry to use Indian components in the absence of sufficient production and availability and allow them to reduce the dependence on foreign components in a phased manner.
Along with this, the industry expects Union Budget 2025-26 to prioritize infrastructure development in the sector for development of the 5G ecosystem, along with allocation of funds for R&D in 6G. This will be crucial, as it has the potential to commercialize emerging technologies that are used across a spectrum of activities that support M2M activities, ultra-low latency networks and allow use of new spectrum frequency bands among others. As far as R&D in telecom is concerned, it can be funded through the Digital Bharat Nidhi (the erstwhile Universal Service Obligation Fund) where the funds are under-utilized. The Budget can account for the appropriate allocation of the unutilized funds to undertake R&D in the telecom sector that will significantly contribute to the growth and development of new age technologies such as AI, 6G, IoT.