Technology Transfer Through FDI in India: With Special Reference to Telecommunication

Transcription

1 Technology Transfer Through FDI in India: With Special Reference to Telecommunication A Thesis submitted to Devi Ahilya Vishwavidyalaya, Indore for the award of the Degree of Doctor of Philosophy Supervisor Dr. Rekha Acharya School of Economics, Devi Ahilya Vishwavidyalaya Indore (M.P.) Submitted By Ranjana Patel

2 Dedicated to Lavish (Kanha) Kumar My Son i

3 DECLARATION BY THE CANDIDATE I, the undersigned, hereby declare that the present thesis entitled Technology Transfer Through FDI in India: With Special Reference to Telecommunication Sector, which is approved by the Research Degree Committee, is a bonafide work based on my own research work conducted under the Supervision of Dr. Rekha Acharya at the Research Centre of School of Economics, DAVV, Khandwa Road, Indore (Madhya Pradesh). I have put in more than 200 days attendance with the supervisor at Research Centre. I further declare that to the best of my knowledge and belief, the thesis does not contain any part of my work which has been submitted for the award of any other degree either in this University or in any other University/Deemed University, without proper citation. Place: Indore Date : Signature of the Supervisor Dr. Rekha Acharya School of Economics, Devi Ahilya Vishwavidyalaya Indore (M.P.) Signature of the Candidate Ranjana Patel ii

4 CERTIFICATE This is to certify that the study entitled Technology Transfer Through FDI in India: With Special Reference to Telecommunication Sector is done by the candidate Ms. Ranjana Patel, has duly completed the research work entitled under my supervision and guidance. This is to further certify that to the best of my knowledge and belief, the thesis embodies the work of the candidate herself and that she has worked under my guidance and fulfils the requirements of the Ordinance related to Doctor of Philosophy (Ph.D.) degree of the Devi Ahilya Vishwavidyalaya, Indore (M.P.). The data incorporated and presented in the thesis are genuine and represents the bonafide and original work of the candidate. It is herewith certified and recommended that the thesis is up to the standard both in respect of contents and language for being referred to the examiner. Date: Signature of the Supervisor Dr. Rekha Acharya Associate Professor, School of Economics, Devi Ahilya Vishwavidyalaya Indore (M.P.) iii

5 ACKNOWLEDGEMENTS It is in fact the most difficult task to express my gratitude towards my Ph D Supervisor, Dr. Rekha Acharya, Associate Professor, School of Economics, DAVV, Indore. Whenever I sat to write and acknowledge her for the guidance, my heart was fully poured with so much respect and admiration, that thought and ideas totally vanished. After my conscious and willful efforts to be in the writing mode, I can only express my heartfelt respect and sincere thanks towards her. It is her inspirational guidance, enthusiasm, encouragements and unconditional help due which I have been able to finish my doctoral work. Her whole-hearted and unweaving support at all the time has made this work possible. Her shelter, support and guidance were the major instruments that enabled me to complete the task. Today this research endeavor could see the light of the day because of her scholastic excellence with a rare combination of motherhood. For me, she is not only a teacher, but also a guide and lifetime mentor. I also express my thanks to her family members and especially her childrens Anushka and Adhiraj for always being sporty about their time being compromised. I express my gratitude to Dr. Ganesh Kawadia, Professor and Head, School of Economics, D.A.V.V., Indore for constantly guiding and supporting me during the entire research work. I express my heartfelt thanks for believing in my potential and making me realize that this work can be done especially in times when I felt it is not possible for me. I have always realised and believed that you are a true mentor to me always. I also feel indebted to Dr. Yogeshwari Phatak, Director, Prestige Institute of Management and Research (PIMR), Indore for providing me support, encouragement and facilities during my research work. With her immense concern and commitment for research work in general and faculty development in particular, has made this work possible. She is a continuous support not only as a Director but more as a mentor and a real concerned friend. It is a pleasure to express my appreciation and thanks to all my colleagues, who helped me directly and indirectly during the long course of this research work. It is my privilege to express whole-hearteded thanks to Dr. Manisha Singhai, Associate Professor, Dr. Swarnjeet Arora, Associate Professor, Dr. Sachin Mittal, Associate Professor, Dr. Anukool M. Hyde, Associate Professor, Dr. Bhavna Sharma, Assistant Professor, Dr. iv

6 Satnam Ubeja, Assistant Professor, Dr. Ashwini Sharma, Associate Professor, Dr. Nitin Merh, Associate Professor, and Dr. Vipin Choudhary, Associate Professor. I would also like to mention the names of Ms. Smita Sharma, Shri M. L. Bais, Controller of Examination, Shri Rakesh Dubey, System Administrator and Shri Devendra Sen for their constant motivation and support. I express my sincere thanks and love for my younger sister who not only motivated me but also has helped me continuously in every way possible. I also thank her for always believing and making me realize that I can accomplish this task. This work is a sincere effort from my end to express my utmost love to my sister Ms. Rashmi Patel and my son Master Lavish (Kanha) Kumar who have supported and cooperated in every way possible. I also would like to thank love of my life, my husband Mr. Girish Kumar who was always there and have supported me emotionally during the work. I am grateful to my parents Shri. Shiv Narayan Patel and Smt. Kusum Patel and also my brother Mr. Rajesh Patel that they always believed and motivated me for this work. I deeply thank my inlaws Shri G. N.Kumar and Mrs. Santha. N. Kumar for their love, understanding, patience, endless support and never failing faith in me without which this would have been not possible. I would express my deepest thanks and gratitude towards Dr. Manohar Pandit, Retd. Professor, Rani Duragawati Vishwavidalaya, Jabalpur, my mentor, guide, family and friend. He believed me to the extent that he made me what and where I am today. He was always confident of my skills and knowledge more than myself. His wisdom, knowledge, insightful inputs and cooperation extended to me during the entire research work has made this work possible. I acknowledge able, courteous and cordial officers of Devi Ahilya Vishwavidyalaya, Indore for all the facilities, guidance and encouragement extended whole-heartedly and sincerely during the course of this research study. Finally, I shall fail in my duty if I don t whole-heartedly thank all mighty God, workers at all levels in my institute and beloved students for making this work such an enriching and learning experience. I ones again sincerely thank and express my deepest regards to everyone I am acquainted to. v

7 PREFACE Foreign Direct Investment (FDI) is a driving force of globalization and an important engine of economic growth. Developing as well as developed countries seek to attract FDI due to its many advantages for economic development. FDI can not only bring, capital to an economy, but also transfer knowledge, technology and skills, as well as generate employment and trade. Due to its economic significance and social impact, FDI statistics has become an essential parameter for facilitating national policy-makers to set up regulatory policies and development strategies, and for international institutions to monitor global and regional economic trends and globalization process. Over past two decades, FDI has been one of the most important driving forces for the world s economic growth boosting domestic Capital, productivity and employment. The US Commerce Department defines FDI as ownership or control by a foreign person of 10 percent or more of an enterprise's voting securities or the equivalent, which is deemed enough to influence management decisions. Thus, benefits of foreign investment include promoting economic growth, technology transfer and job-creation in the local economies. It is assumed that exports would increase since a large part of exports is comprised of shipments from domestic companies to their foreign affiliates. vi

8 Although FDI implicitly brings large economic benefits and potentially attracts numerous business opportunities, many countries are only partially open to foreign investment or even refuse business with foreign enterprises. There also exists fear in the countries attracting FDI that they will be losing the control power over the local economy by inviting foreign investment. They often use performance requirements such as exporting requirements or technology transfer agreements to control the categories and sizes of FDI (Thompson, 1999). Technology Transfer represent the transfer of machinery, equipment and technological know-how either directly in the form of FDI or through spillover effect from the industry attracting FDI. Technology transferred from foreign investment projects will improve the efficiency of local firms as well. These effects become the major attractions for developing and underdeveloped countries seeking foreign investment. The present work makes an attempt to study the extent of technology transfer through FDI in India. This may be help us not only in understanding the contribution of telecommunication sector to economic growth and development of India but will also be helpful in formulation of more realistic policies for telecommunication sector in future. vii

9 The report comprises of seven chapters including References and Appendix. First Chapter is introductory in nature which covers introduction, structure, History, reforms in telecommunication sector and its current scenario. Second Chapter is Review of Literature. This chapter briefly discusses researches carried out by various researchers in chronological order with respect to the studies related to FDI and Technology transfer. The chapter tries to identify various important variables for the formulation of the objectives and Hypothesis. Chapter three defines the rationale of the study, objectives and hypothesis formulation for the current study. Chapter Four states the research methodology on the following points. This chapter covers the Nature and Area of Study, Period of Data, Data Source and Structure, Definition of Variables and Tools for Data Analysis. Chapter Five gives detailed description of results and discussion as per objectives. Chapter Six contains two sections namely Conclusion, Suggestions and Policy Implications. Chapter Seven highlights the scope for future studies. Place: Indore Date: Ranjana Patel viii

10 List of Figures / Graphs and Tables Sr. No. Description Page No. 1. Figure 1.1: Present Scenario of Indian Telecommunication Sector 2. Figure 1.2: Benefits of Telecommunication Sector in an Economy 3. Figure 1.3: Telecommunication Ecosystem 4. Graph 1.1: Service Provider Wise Market Share on June Graph 1.2: Share of Indian Telecom Industry 6. Table 1.1:Milestone Events in Indian Telecommunication Sector 7. Table 1.2: Telecom FDI Policy Table 4.1 : Data Source and Description of Variable of the Study Collected for the Period of 2000 to 2013 Graph 5.1: Scatter Plot of Total Teledensity, Wireline and Wireless Telendensity for the Period of Graph 5.2: Graph Showing Total, CDMA and GSM Services Average Revenue Per User for the Period of Graph 5.3: Graph Showing Total, Wireline and Wireless Subscriber Base for the Period of Graph 5.4: Graph Showing the Total, CDMA and GSM Services Minutes of Usage for the Period of Table 5.1: Teledensity (per cent) 14. Table 5.2: Average Revenue Per User Per Month (ARPU) 15. Table 5.3: Subscriber Base (In Millions) 16. Table 5.4: Minutes of Usage 17. Table 5.5: ANOVA Table for Technology Transfer Determinants Table No : 5.6 Model Summary for Technology Transfer Determinants Table No: 5.7 Coefficient Model Summary for Technology Transfer Determinants 20. Table 5.8 : ANOVA Table on Impact of FDI on Domestic Investment 21. Table 5.9: Model Summary on Impact of FDI on Domestic Investment 22. Table 5.10: ANOVA Table on Impact of FDI on Exports

11 23. Table 5.11: Model Summary on Impact of FDI on Exports Table 5.12: ANOVA Table on Impact of FDI on Production of Telecom Equipments Table 5.13: Model Summary on Impact of FDI on Production of Telecom Equipments Table 5.14: Coefficients Table on Impact of FDI on Production of Telecom Equipments Table 5.15: ANOVA Table on Impact of FDI on Growth of Service Sector Table 5.16: Model Summary on Impact of FDI on Growth of Service Sector Table 5.17: Growth of Capital and Labour in Indian Telecommunication Sector Table 5.18: Table showing Total Factor Productivity of Telecommunication Sector

12 ABBREVIATIONS ARPU Average Revenue Per User CDMA Code Division Multiple Access C-DOT - Centre for Development of Telematics CMTS - Cellular Mobile Telephone Service CMTS- Cellular Mobile Telephone Services CPP - Calling Party Pays DoT - Department of Telecommunications DTH- Direct To Home DTS - Department of Telecom Services FDI- Foreign Direct Investment FTS - Fixed Telephony Services GSM Global System for Mobile Communications ILD - International Long Distance IP- Internet Protocol ISP - Internet Service Provision IUC - Interconnection Usage Charges MNP- Mobile Number Portability MOU - Minutes of Usage MTNL- Mahanagar Telephone Nigam Limited NFAP - National Frequency Allocation Plan

13 NGN - Next Generation Networks NLD - National Long Distance NTP- National Telecom Policy PTT - Department of Posts, Telephone and Telegraph SDCA - Short Distance Charging Area TEMC Telecom Equipment Manufacturing Council TOT Transfer of Technology TRAI Telecom Regulatory Authority of India UASL - Unified Access Licensing UASL - Unified Access Service License UNCTAD United Nation Conference on Trade and Development USOF- Universal Service Obligation Fund VAS - Value Added Services VSAT- Very Small Aperture Terminal VSNL Videsh Sanchar Nigam Limited WLL - Wireless Local Loop