The Politics of Telecommunications Regulation: State-Industry Alliance Favouring Foreign Investment in India

Rahul Mukherji

Journal of Development Studies, 2008, vol. 44, issue 10, 1405-1423

Abstract: This paper explores the political economy of three significant policy decisions of the Congress-United Progressive Alliance government between November 2005 and February 2006. These decisions improved the regulatory incentives for the smaller and efficient firms in the Indian GSM industry, which were heavily dependent on foreign investment for their expansion. India's telecommunications sector became more attractive to foreign investors as a result of these regulatory changes. This was a notable departure from the past when government policy had favoured large domestic investors using CDMA technology who were not dependent on foreign capital. A globalisation friendly policy change occurred after a Centre-Left United Progressive Alliance coalition came to power. The paper argues that these decisions, which promoted both competition and foreign investment, occurred due to the increased sensitivity of the Department of Telecommunications towards the needs of the relatively smaller GSM service providers, driven by considerations of efficiency. They were not driven by a crisis of private investment, foreign pressure, or stealth. The shift occurred in normal times when the Department of Telecommunications under a persistent ministerial stewardship took on a regulator, which was less interested in engineering this shift. This globalisation-friendly strategy depended to a large extent on the particular industrial sub-sector that the ruling party or coalition supported for spreading telecommunications in India.

Date: 2008
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DOI: 10.1080/00220380802358499

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