The digital highways to India’s post-Covid-19 economic recovery!

The digital highways to India’s post-Covid-19 economic recovery!
October 19, 2020 No Comments Business, City, Culture, Digital Marketing, Education, Environment, Finance, Health, International, Life, Medical, Nature, Other, Social Media, Trends Priya Saha

As COVID19 coursed through countries, governments responded with lockdowns and digital marketplaces thrived as interactions moved online. Globally, digital adoption has catapulted 5 years in merely 2 months (McKinsey). In India, retail, healthcare, digital payments (amongst others) are witnessing this change in consumption patterns. 

Conversely, this unforeseen shift led to a communication gap between buyers and sellers, leading to unfinished transactions, information asymmetry and market failures. To handle this traffic spurt, maintain business continuity, and propel India’s digital economy from $200 million (2017-18) to $1 trillion by 2025, increased investments are required in digital infrastructure.

Investing in our digital future, or not?

The Asian Infrastructure Investment Bank estimates India’s annual investment on digital infrastructure to be ~$20-22 billion, or 0.7% of GDP (2018). Despite this, pre-Covid-19 estimates from the Global Infrastructure Outlook show that India’s telecom sector faces a ~$167 billion investment gap between 2015-2040, much higher than corresponding values for East Asian economies. 

Government spending on telecom – has been less than 0.2% of GDP since 2017-18, with just ~20% going towards capital expenditure. Private telecom service providers, who account for ~70% of digital infrastructure investments across Asia, face tough domestic market conditions. India has amongst the lowest revenues per user globally, and, of its three major telecom companies, only one is profitable. 

Is India ready for a 5G rollout? 

Tele-density grew from 18% in 2008 to 87% in 2020, with rural users forming ~44% of the subscriber base, thanks to a series of government and private sector initiatives. The next phase of growth and transition to Industry 4.0 is expected to be powered by a robust 5G network. However, India’s 5G readiness, and capacity of operators to invest in requisite network densification and upgrades in fiber connectivity, is concerning.

  • Complex regulatory procedures governing right-of-way pose hurdles in rolling-out optical fiber cables and telecom towers. India’s Fiber-to-the-Home construction cost, at $1,580/subscriber, and right of way fees, at $10,000/km, are among the world’s highest (ITU).
  • The reserve price of 5G spectrum has been set at $70 million in India, vs. $18 million in South Korea, $10 million in the UK, and $5 million in Australia. 
  • Industry investment of $60-70 billion is required across digital infrastructure sectors – connectivity, storage, applications, and devices, to enable a commercially-viable 5G rollout. Given cumulative debt of ~$100 billion and industry revenues falling from ~$40 billion (FY16) to $33 billion (FY19), investment capacity of telecom companies is constrained.
  • Less than 25% of telecom sites are currently connected through fiber. Reaching ~80% of telecom sites necessitates capital investment of ~$8 billion (Deloitte).
  1. Innovative financing: 
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a. Governments need to incentivize the use of blended financing instruments, and co-investment vehicles for Public Private Partnerships (PPPs). In 2011, the Government of New Zealand provided upfront debt and grant investment worth NZ$1.35 billion for an NZ$3.5 billion Ultrafast Fibre Deployment project. This enabled the country to achieve ~70% fibre coverage by 2016.

b. A ring-fenced digital infrastructure fund can be created at the National Infrastructure and Investment Fund (NIIF) by pooling budgetary allocations, FDI, private equity, revenue from spectrum allocations, funding from development banks to invest in both dedicated and hybrid digital infrastructure. 

2. Beyond fibre: Additional areas of investment: 

c. Data-centres: India’s data center outsourcing market was estimated at $2 billion in 2019. As the volume of digital transactions multiply in a post COVID19 economy, global firms are likely to move towards off-site, hosted cloud services. Data localization requirements will fuel domestic demand. India’s policies need to incentivize plug-and-play data center parks, with uninterrupted power supply through thermal and renewable sources.

d. Hybrid Infrastructure: Tech-enabled trunk infrastructure, e.g. smart grids for energy-efficiency, predictive highway maintenance, smart water meters, can generate operating cost efficiencies. Estimates suggest potential annual savings of ~$80 billion for the power sector, ~$34.5 billion for drinking water supply and ~$28.6 billion for wastewater management globally. Given India’s annual infrastructure investment gap of ~$180 billion, – hybrid infrastructure investments hold massive economic potential.

3. Bridging the digital divide 

e. Expand Wireless Broadband in rural areas: A 10% increase in internet subscribers can improve a state’s per capita GDP growth by 2.4% annually (ICRIER). Rural India comprise only ~33% of all broadband users. Broadband poses a cost-effective alternative for expanding high speed internet access to diffused rural areas, given the high costs of laying OFCs. The BharatNet scheme needs to be expanded beyond gram panchayats to provide door-to-door broadband connectivity through PPP mode. The success of ITC’s e-Choupal e-agricultural marketplace which has brought 4 million farmers across 10 Indian states online, shows that CSR funding can also be leveraged for expanding access under BharatNet.

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f. Long-term investment in digital literacy:  Digital literacy is currently advanced through ~275,000 training centers under the PM Gramin Digital Saksharta Abhiyanm. However, a wide array of digital skills need to be mainstreamed into school curriculums especially for first generation school-goers.

4. Regulatory framework: 

g. ‘Dig once’ or ‘Dial before you Dig’ policies should be framed to minimize excavations, such that optical fibre cables (OFCs) and conduit can be buried underground before other infrastructure works are undertaken.

h. Structural separation of integrated telecos into two independent businesses: network operators (NetCo) and consumer facing service providers (OpCos), may be considered, considering increasing capital costs and network sharing associated with 5G. Studying the success in Singapore, Czech Republic, New Zealand, vs. challenges in Britain, the Government should assess strategic-suitability  for the Indian market.  

i. The Indian Telegraph Act, 1885 must be amended to recognize telecom as essential infrastructure and OFCs as public utilities, in line with the National Digital Communications Policy 2018, so that projects receive faster clearances and implementation priority.


The UN considers the internet to be a human right. India needs to prioritize investments in connectivity infrastructure to ensure that opportunities and benefits of a digital economy accrue to all. Setting achievable goals, providing financial support, and monitoring implementation at district level through a dedicated cell at NITI Aayog are paramount to hasten implementation.

About The Author
Priya Saha I am content writer at LoogleBiz -A Large Local Business Directory with over 5 years' experience in creating high-quality content for a range of clients. Writing clear marketing copy to awareness about products/services, Preparing well-structured drafts using Content Management Systems, Researching industry-related topics (combining online sources, interviews and studies), include conducting thorough research on industry-related topics, generating ideas for new content types and proofreading articles before publication. #Some qualities that I have - *Excellent command over English language. *Basic analytical skills. *An eye for details. *Ability to meet deadlines. *Ability to develop innovative and engaging content. *Being able to deliver under deadlines. *Excellent writing and editing skills in English *Good command over Microsoft Office tools like Word doc, Powerpoint etc.

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