Foreign Direct Investment in Telecom Sector

COMMERCE

ABSTRACT Foreign Direct Investment (FDI) is an investment in a business by an investor from another country for which the foreign investor has control over the company purchase. Telecommunications in India were formerly provided by state-owned enterprises. The government companies provided all local and long-distance communications within India. Private investment, foreign and domestic was not permitted prior to the opening of the economy in the 1990s. Foreign direct investment in the telecommunications sector increased substantially between 1995 and 1997. India has several positive attributes that attract FDI in Indian telecommunication sector – a stable political environment, large consumer market, skilled labor force and access to the Asia-Pacific region. There are, however, several barriers to growth in attracting foreign direct investment for the Indian telecommunications sector such as cost of mobile phones and services, high infrastructure costs, tax policies, unclear FDI policy and regulation and corruption. There are several factors that influence the amount of FDI present for a country and in specific sectors of that country such as level of infrastructure and support for infrastructure in a country, educational characteristics of the workforce and urbanization of the population. This paper will examine the current status of foreign direct investment (FDI) in the Indian telecommunications sector and the issues facing foreign companies seeking to invest in the Indian telecommunications sector. Keywords: FDI, Telecommunication, Tele Density

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