Memo #172
By Amitendu Palit – isasap [at] nus.edu.sg
India entered the elite global club of $1 trillion-plus (USD) economies in the last decade accompanied by explosive growth in domestic mobile phone users. India had the second largest population of mobile phone users as of 2010, an astounding leap from their modest rank of 34th ten years earlier.
This growth has been dependent upon the unexpected phenomenon of China, who many would dub one of India’s “estranged” neighbours, becoming India’s second largest trade partner, surpassing the United States and Europe. India’s mobile economy, in fact, relies on trade with China.
India’s mobile revolution has been fed by a steady supply of imported equipment from China. It is driven by the soaring appetite of a country savouring the new world of cheap connectivity and novel value-added services through mobile phones.
What is more, India’s rapid expansion of domestic telecom service networks could not have occurred without these Chinese imports, which bridged the gap in supply of telecom equipment produced by a limited-scale, low-capacity indigenous equipment manufacturing industry.
There is now a greater asymmetry in bilateral trade and rising anxiety in India over high dependence on “foreign” goods in the strategically sensitive telecom sector. The situation is unlikely to change soon.
India simply does not have the capacity to produce sufficient telecom equipment, and would only slowly reap the rewards of sustained research and development and other preferential policies in the telecom sector.
India’s neglect of domestic telecom manufacturing is evident from the lack of appropriate policies for encouraging research and development and ensuring availability of finance. This, in turn, ensures that Chinese imports will remain indispensable to India’s mobile growth regardless of the anxiety.
The import-dependence might affect the trade balance adversely. But this is unavoidable since Chinese imports are cheaper than those from other countries. These imports might swell once India graduates to more advanced mobile and communication technologies, like the 4G networks, and adds more mobile subscribers.
About the Author:
Dr. Amitendu Palit is a Visiting Senior Research Fellow at the Institute of South Asian Studies (ISAS) in the National University of Singapore specializing in China-India comparative economic studies and political economy of development policies.
‘Celling’ China in India
Links:
- Dragon in the Elephant’s Backyard: Chinese Imports in India’s Mobile Revolution, Pacific Affairs, September 2012. (By Amitendu Palit)
- DoT move to curb imports worries Chinese telecom companies, The Hindu, August 30, 2012.
- India bans Chinese telecom imports, Financial Times, Aug 28, 2010. (Subscription required)