Foreign direct investment in the Indian telecommunications sector



caused many foreign companies doing business in India to ensure that disputes are subject to
international arbitration.
45 The legal system is fair but a backlog contributes to very slow
resolution of cases. In addition, policies may also be implemented that have a greater benefit for
domestic industries in comparison to foreign firms.

Rural areas are expected to account for the majority of future growth in mobile telephone
subscribers.
46 However, persons living in rural areas are the poorest people in India and the least
able to afford handsets or the telephone services. Currently, it is estimated that only 24 percent of
towns with a population of 50,000 or less have mobile phone coverage. This is in sharp contrast
to towns with populations of 50,000 or more who have mobile phone coverage of 94 percent or
greater.
47 In March 2003 overall teledensity in urban areas was 15.16 and the teledensity in rural
areas was 1.49.
48 It is estimated that approximately one third of the rural villages in India lack
even basic telephone service.
49

India suffers from real and perceived government corruption and this has hampered the
attraction of foreign direct investment. Transparency International, an organization that tracks
corruption in countries via the use of surveys, currently assigns India a Corruption Perception
Index of 2.8 for 2004.
50 An index rating below 3 indicates that the country is perceived to have
serious and rampant corruption as a cost of doing business. In 1995 the index for India was 2.78.
India has shown no discernable improvement in the perception of corruption in the country. This
has likely had a negative effect on foreign direct investment to India.

45 Economist Intelligence Unit, “Laws and regulations: working slowly through the system”, Business India
Intelligence - Main report, April 20th 2005.

46 Businessline. Chennai: Oct 25, 2004. pg. 1

47 Census of India and Nokia Corporation.

48 Indian Department of Telecommunications.

49 Indian Department of Telecommunications - http://www.dotindia.com/plans/planindex.htm

50 The Corruption Perceptions Index reflects the perceptions of people doing business in the country and country
analysts who may or may not reside in the country. The 2004 Corruption Perceptions Index uses 18 surveys received
by Transparency International between 2002 and 2004, administered by 12 independent organizations.

13



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