Addressing the embedded technology track of Bangalore IT.biz 2010 conference, he said the country imports $20 billion worth of telecom equipment every year, which amounted to 14 to 15 per cent of the trade deficit. Telecom equipment accounts for the second highest outflow of foreign exchange after petroleum, he said.

Experts point out that India enjoys several favourable conditions required to build a competitive telecom equipment industry. The country has a large domestic market, strong software capability, which is increasingly the differentiator in telecom and networking equipment manufacturing, a vibrant stock market and a maturing venture capital industry.

But the manufacturing of telecom equipment is yet to gain traction in the country.
“Most of the present manufacturers usually import components, assemble in their factories and ship them out,” Nayak said. He blamed the lack of proactive government policy and infrastructure handicaps for poor growth of the industry. As a signatory of the WTO agreement India allows import of telecom equipment with zero duty. So, there was no motivation to manufacture locally as it was easier to import equipment, Nayak said.

He also cited studies which report that due to poor infrastructure manufacturing companies in India had a ‘26 per cent handicap’ when compared to China.
Lack of a component eco system, long-term financing and domestic success stories are also often cited as reasons hindering the growth of the telecom equipment market in the country.

But the coming explosion in the broadband, which is expected to help increase the number of Indian broadband subscribers 10 fold from the present 9 million, provides a renewed opportunity for Indian firms to get their act together. The government and the industry should act in cohesion to tap this opportunity, Nayak said.