Telecommunications: The Underlying Transport Means for Services Exports

Abstract

This paper analyses the role of telecommunications as a means of transport for services exports with a focus on computer and other business services in India. Telecommunications are typically dominated by major suppliers which need to be regulated and exposed to competition to fulfil their role. This paper notes that India took sweeping unilateral reforms in the telecommunications sector in the 1990s but has been reluctant to bind reforms in international trade agreements. It goes on to show that India is lagging as compared to other lower middle-income countries on international measures of connectivity, and that connectivity is strongly related to timely adjustment of policy to changing market conditions and technology. Second, using gravity estimates, it has been found that connectivity is an important driver for trade in computer and other business services. In particular, broadband connectivity significantly reduces the rate at which exports fall off with distance and extends the reach of exports to distant markets.