Showing posts with label imports. Show all posts
Showing posts with label imports. Show all posts

Thursday, April 7, 2022

Telecom Reforms: Reducing Self-Imposed Barriers

 

Less restrictive regulations with better process discipline could improve broadband reach and functionality.

Shyam Ponappa   |   April 7, 2022 


Uncertainties with global supply chains are likely to persist even if geopolitical tensions ease in the coming months. With India’s dependence on energy imports of oil, gas, nuclear fuel, and materials such as cobalt, lithium and nickel for solar cells and batteries used in communications and information technology equipment and electric vehicles, we need to dedicate more focus and serious effort to fending for ourselves where possible over the longer term.

The ongoing processes of strategy formulation, execution and resource allocation necessarily involve trade-offs in choosing where and how to allocate time, capital, and human resources. In this context, advocates for services over manufacturing, or freewheeling opportunism, or those against performance-linked incentives (PLI) for manufacturing, may be glossing over the fact that our size and circumstances make for imperatives that could have been different if we were a smaller country, or at a different stage of development, but ultimately, only if it were a kinder and tidier world. Retaining a degree of autonomy requires a level of security in essentials, including in defence, food, and other areas. Our stage and state of development are also often overlooked, especially when commentators don’t tailor solutions to fit the context of our facts, including the culture/s, processes, and institutions, or the lack of them.

Two conditions in particular that hamper our capacity for enterprise and productivity need redress, besides social disharmony. One is an unsystematic approach, lacking goal-oriented, integrated planning and end-to-end execution. The second is regulatory constraints, often in the form of legacy holdovers that have not been reformulated to meet our present and anticipated requirements.

An example of the consequence of unsystematic practices is stranded electricity generation projects, despite potential users without adequate power, because transmission and distribution have not been built into the project “solution” as a prerequisite. Another example is the state of our broadband and telecommunications services, where many users have unreliable or inadequate access, because end-use delivery has not been successfully configured. A third instance is our highways, for which impressive statistics contrast with the highly uneven experience in using some of them

The open secret, of course, and the most difficult part, is to have a dedicated, end-to-end plan for projects, with the linkages thought through and provided for and executed in their entirety to achieve effective delivery without being distracted by new leads and schemes. Given the way technology linkages have developed, communications and information technology are key drivers for all technologies and infrastructure, as well as many aspects of superstructures. We sorely need pervasive, reliable, well-functioning networks. The criteria of good delivery and efficiency require policy reforms regarding the way spectrum is assigned, used, and paid for, how it is regulated for operator access, and how all network resources are optimally utilised for user benefit. That is the task, starting from where we are, with what we have.


For optimal service delivery, there are three aspects to the structure of our telecommunications requirements:

- The core network or backbone and skeleton,

- The distribution to user clusters beyond, and

- End-user connectivity within clusters.

At the first level, fibre networks are available in most urban and semi-urban centres, but in less than half of our gram sabhas or village-cluster centres. The criterion to be ensured is network quality for delivery standards including up-time, not just nominal connections. Rural coverage perhaps needs to be tackled systematically in sections, with realistic time frames and budgets, unalloyed by electioneering grandstanding and exaggerated claims that emphasise announcements over delivery and performance.

The second level is the extension and distribution of links from existing fibre networks within cities, and to villages in each cluster. Given continuing difficulties in completing the BharatNet fibre network to the numerous village clusters that don’t have fibre connections, a possible way to bridge this gap may be to enable and use high-capacity wireless links. Policies facilitating the use of viable wireless means do not exist even as these could improve network reach and functionality. Appropriate changes could enable the use of spectrum bands such as 60 GHz and 70-80 GHz for point-to-point fronthaul, mid-haul and backhaul. Six GHz could be enabled for high-speed Wi-Fi. Financial viability could be evaluated using modelling and simulation exercises.

Perhaps wireless links up to several kilometres to gram sabhas also need to be considered in place of fibre which has not been possible to install for years on end. In more remote cases, the use of satellite links may be a necessary expense, with the likely availability of such links with recent changes in policies. The third level needs a combination of fixed and wireless end-of-middle-mile links, with cellular or Wi-Fi user access.

Given the legacy of colonial-era laws, a conscious, imaginative effort may be useful, such as the use of a negative list as in trade agreements of prohibited items, with the rest open to consideration by due process when sought by service providers. This would enable, for instance, industry representatives mooting the consideration of 12 GHz for Wi-Fi going forward, on the lines of developments in the US, the European Union, or the UK.

For equipment and solutions, there is a product-and-services aspect for global as well as local markets that is much larger, which involves manufacturing and integrating services to deliver solutions. These avenues are closed off to our talent and enterprise because of our regulations. These regulations hamper us needlessly, forcing us to constrain ourselves in ways that other nations do not restrict their people. Enabling policies could remove these constraints, so that research, development and experimentation are facilitated for our vast talent pool. There is no other way in which we can hope for domestic production for local markets, for instance in wireless equipment, without prohibitive levels of imports.

If we have rapid facilitation of controlled trials and testing by authorised industrial and academic institutions, active development and proliferation of devices would be possible here. This would enable the design, development, and production of solutions for local use, as well as for the much larger global markets, e.g., for 5G applications, for which there is no domestic market yet.


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Shyam (no space) Ponappa at gmail dot com

Disclosure: The writer is associated with proposed wireless trials.

Friday, December 4, 2020

Aim Long Term For A Strong Currency

 


Strong currencies reflect strong economies.


Shyam Ponappa   |   December 3, 2020


Is a strong currency not desirable for India? There seems to be broad acceptance that a declining rupee is essential for exports. Is this true long term that it is in India’s interest to have a currency that is consistently losing value? Consider this in the context of our long-term interests.

As exports become more expensive with a stronger currency, sectors relying on wage-rate arbitrage, such as Information Technology Enabled Services and labour-intensive manufacturing, will suffer reduced margins, or may even become unviable. Such activities ideally need policy support for transition where feasible to more productive alternatives over a reasonable period. These could be for improvements of process and product design, with automation or computer aided processes, as in jewellery, or skills for a different activity. For high-value products, enhanced quality may be needed to deliver perceived value.

The Indian rupee has depreciated against the US Dollar continuously on average from 1980, except for 1992-95 when it traded between Rs 30-33 to the dollar, and 2003-2011 when it was Rs 44-48. This reflects the relative strength of the economies and market sentiments, with the US having been a more productive economy, with lower inflation.

Excluding countries dependent entirely on natural resource endowments, such as oil, or attributes such as being a tax haven, strong currencies reflect strong economies. Examples are the US dollar, euro, British pound, Japanese yen, Swiss franc, Chinese yuan, and Singapore dollar. The relative weakness of economies is likewise reflected in weak and depreciating currencies. High inflation or internal contention and turmoil undermine the strength of an economy, and the currency usually depreciates.

The advantages of a strong and stable currency are that buying power for imports is protected. For India, this is important for containing expenditure for oil and other energy imports, defence procurement, gold, electronics, withdrawals by foreign portfolio investors, external borrowing repayments, imports of raw materials and intermediates used in manufacturing for domestic markets and exports, and for travel. For a given set of items of expenditure, a strong currency gives consumers more disposable income because of reduced costs, and enterprises have higher surpluses from better profit margins.

In the short run, constraints on movement and economic activity during the Covid-19 pandemic led to increasing inflation in food, gold, transport (including higher taxes on petrol, diesel and alcohol), and com­munication.1 Some analysts suggest an overweight food component may overestimate inflation. The problem arises if there is a stock policy response of raising interest rates now, whereas our circumstances require a facilitation of flows, and not restraints. This also applies to the level of contention through all government action, as against focus on the economy and security/defence to get us through these times. We need our government to focus on facilitation, not contention. Contention reduces productivity, as do all impediments and shortcomings in infrastructure.

Higher Productivity = Higher Growth = Stronger Currency

Longer term, after recovery, is the declining rupee a foregone conclusion? Yes, if we continue with business as usual. Instead, if we work systematically towards focussed changes for growth through productivity, while dealing with emerging market realities of agricultural shocks and wage-push inflation, this could help build a solid recovery and better long-term prospects. Radical improvement in infrastructure will probably enable breakthroughs in productivity. Equally radical changes in organising human resources, and markets (i.e. second-order infrastructure) could further accelerate growth. However, these require choosing appropriate objectives, disciplined teamwork in design and execution, and no disruptive political developments. If we are successful, we will grow faster and the rupee will strengthen.

Infrastructure And The Currency

The rupee will continue to depreciate unless we become more productive and grow faster. India is lagging so badly even among emerging markets that we have to think of doing things differently. 

Krishna Kant, 2020:

https://www.business-standard.com/article/economy-policy/india-s-10-year-growth-one-of-the-biggest-laggards-in-asia-em-peers-120113001325_1.html). 

Impro­ved infrastructure is a way to achieve better productivity and higher productivity and growth.Some of our difficulties stem from efforts to contain the pandemic, but the obstacles of poor logistics, power, communications, water and sanitation, have to be surmounted for growth. These services will also enable pursuing higher standards and skills for manufacturing, processes, and emissions control. Poor services and standards are major deterrents to transnationals looking to set up in India or to relocate here.2 For pharmaceuticals, the government has announced a policy for bulk drug parks and for domestic manufacturing of import-dependent APIs. While additional steps such as anti-dumping duties and targeted manufacturing incentives may be needed, similar systemic initiatives are required for industries such as chemicals, machinery, automotive components, and electronics. All of them need smooth inward and outward logistics for good results.

illustration: Binay Sinha

Illustration: Binay Sinha

In addition, another serious deterrent for transnationals is the unpredictability of policies, and the hurdles encountered by large international investors in India, for example, Vodafone, Amazon, Walmart, Cairn, major automobile manufacturers, and so on, including in resolving contracts and disputes.

Targetted steps are required on the lines suggested in the previous citation and in the next,3 such as global anchor investors for priority industries, in the way that Suzuki was to automobile manufacturing, with nodal government coordination, not harassed and impeded, but nurtured to ensure success. Such initiatives need to be explored and evaluated, and if feasible implemented for select industries. Exports cannot be successful without imports at low tariffs, because of global value chains. There is also the issue of finance including scale, and finally, purchase orders, especially for manufactured products. Government’s enthusiasm for start-ups is not sustained at the next phase with purchase orders and funding for commercial scale, once start-ups are past venture rounds. This leaves promising manufacturing enterprises floundering, and unable to scale up.

Export capabilities need to be developed and built on scale, adapting policies in other emerging economies such as Bangladesh and Vietnam. While Vietnam has the advantage of proximity to China, its steps to build capacity need study and consideration, as also for Bangladesh. We should aim to build India’s export capabilities over time, to contribute to a strong economy and more stable currency.


Shyam dot Ponappa at gmail dot com

1: a) Remya Nair, 2020: https://theprint.in/economy/its-not-just-food-prices-covid-pandemic-has-also-helped-push-inflation-to-7-6-in-india/546473/

b): Dharmakirti Joshi & Adish Varma, 2020: https://www.crisil.com/content/dam/crisil/our-analysis/views-and-commentaries/quickonomics/counterintuit­ive-inflation.pdf

2: Hetal Gandhi & Isha Chaudhary, 2020: https://timesofindia.indiatimes.com/blogs/toi-edit-page/factory-of-the-world-how-india-can-be-a-plus-one-destination-while-reducing-dependence-on-china/

3: Ajay Srivastava, 2020: https://timesofindia.indiatimes.com/blogs/toi-edit-page/from-start-to-port-a-nine-steps-framework-for-making-india-a-great-investment-destination/

Thursday, November 1, 2018

A Great Start on Wi-Fi Reforms





The 5 GHz regulations are exactly what we needed for a start. But we need a lot more, and not only from the DoT.


Shyam Ponappa    |   November 1, 2018


This item of detail is almost like magic. The MoC has done something splendid regarding Wi-Fi. Its 5 GHz spectrum regulations have everything we could wish for. But it’s a first step — only the first. Much more is needed to reap the benefits.
To put it in context, we now have a policy that enables effective broadband Wi-Fi hotspots, and profound changes in connectivity are feasible for the last mile in India, as in other countries. A high proportion of smartphone traffic abroad is over Wi-Fi. In the recent past, in the US it was around 70-75 per cent, while Japan was around 83 per cent, and Germany about 87 per cent.1 Traffic is offloaded from licensed spectrum, freeing it up for re-use. We have 605 MHz added in the 5 GHz band to the existing 380 MHz for Wi-Fi, and a removal of restrictions on external usage as in the US, so Wi-Fi will have much greater capacity.
The ramifications, however, are ironic. These regulations could lead to a surge in economic activity, and consequent benefits from connectivity. But this will increase imports, which are already overboard on account of oil prices and technology imports, an aspect discussed later in this article.
The increased activities in network installation and ensuing benefits will vary depending on supporting ecosystems of policies and practices. This applies within the communications sector as also at points of interface with other sectors, such as electricity and finance. To illustrate, in communications, consider an unlicensed band in most markets including the US, the UK, and Europe, namely the 60 GHz V-band. Whereas the Federal Communications Commission (FCC) in the US delicensed 14 GHz in this band for “wireless fibre” called WiGig, India hasn’t done so. Instead, another WPC2 notification in October delicensed only 500 MHz (61-61.5 GHz) at very low power. Devices abroad that use this band for 400-metre and 700-metre connections have channels of 2,000-2,500 MHz acting as wireless fibre links over short distances. These can’t be used here. Short-distance connections to Wi-Fi and wired networks in offices and residential, commercial and industrial complexes will need fibre or cable.
This policy link is missing, perhaps because operators oppose it. The user network traffic bypasses operators to the extent that Wireless Internet Service Providers (ISPs) and other entrepreneurs set them up and collect charges, whereas operators have paid huge premiums for the spectrum required earlier. A solution that enables commercial deployment by licensed operators would solve this problem, although ISPs would have to go through operators as before. Another alternative could be to have unlicensed access to public wireless networks owned and operated by BSNL/BharatNet/CSC, or by operator consortiums, on payment of service charges by operators and users.
Equally essential are aspects of ecosystems that are adjuncts from sectors such as power supplies, finances, and local manufacturing, for substantial and stable growth. So for convergence resulting in significant benefits, these are the kinds of problems that will have to be resolved:
  • The power situation, with a conscious shift towards more distributed, renewable (solar and, in some areas, wind) energy, with changes comparable to Wi-Fi/5 GHz in policies and practices. 
  • The financial system and non-performing assets (NPAs), including the steady revival of infrastructure projects. While dealing resolutely with malfeasance and fraud, nursing and reviving good infrastructure underlying the NPAs is crucial. A sorry plight, but if revivable infrastructure projects are allowed to fail, they end up as unproductive, wasted assets (a repeat of Dabhol), with negative multiplier effects. 
  • The imperative for the domestic manufacture of equipment to reduce imports. This is going to be an escalating compulsion because of our market size, unless we develop solutions that help balance imports, such as a compelling tourism strategy (but just think of the complexity of the ecosystem elements that need improvement) or communications equipment exports (equally complex).


Meanwhile, we are on a path committed to curbing demand to contain the deficit: Battening the hatches, tightening belts, and waiting for oil prices to fall /exports to rise, keeping a wary eye on the current account deficit (CAD) because of imports, and inflation. This pressure may persist for months, possibly even years, restricting growth. Aren’t there feasible, growth-oriented initiatives, tempered by not exceeding reasonable bounds, including the CAD?
The data on the CAD, capital formation, FPI inflows, and FDI are in the chart below.





A study of data from 2001 to 2016 of how the capital account and its components, the current account, and gross fixed capital formation affect each other concluded that sustained capital formation requires more foreign direct investment (FDI) relative to other flows.3 FDI was found to have an indirect effect on capital formation, which was found to affect the current account. Debt portfolio flows and nonresident deposits financed the current account, but did not contribute directly to capital formation.
In Indonesia, a study of how the CAD affects exchange rates found that when it exceeds about 2 per cent of the GDP, the exchange rate depreciates over 12 per cent after a four-month lag.4 Tracking such relationships in India would be useful for policy making.
Meanwhile, India’s large growth sectors are plagued by unsustainable economics. For sustained growth, they have to be organised more rationally, to generate profits for productive enterprises. Promising domestic sectors include electricity, communications, and aviation. Bypass strategies as in software and IT-enabled services won’t work, because these services are for domestic markets. They must generate profits without labour arbitrage, while balancing imports and exports, unless growth continues to attract foreign capital. Genuine reform as for Wi-Fi and 5 GHz spectrum with collaboration involving the private sector and governments modelled on the automotive sector are a possible way forward.


Shyam (no space) Ponappa at gmail dot com


1: Claus Hetting, October 2018: https://wifinowevents.com/news-and-blog/japan-83-of-smartphone-traffic-runs-on-wi-fi/; https://wifinowevents.com/news-and-blog/germany-wi-fi-carries-87-of-smartphone-traffic/
2. WPC: Wireless Planning and Coordination Wing, Department of Telecommunications
https://dot.gov.in/sites/default/files/License%20Exemption%20in%205%20GHz%20G_S_R_1048%28E%29%20dated%2022nd%20October%2C%202018_0.pdf?download=1
3. Ashima Goyal & Vaishnavi Sharma, September 2017: http://www.igidr.ac.in/pdf/publication/WP-2017-016.pdf
4. Nugroho et al, January 2014: http://bmeb-bi.org/index.php/BEMP/article/download/445/420/