Evaluation of import substitution strategy in Indian telecom sector: Empirical evidence of non-linear dynamics. (August 2020)

• Record Type: Journal Article
• Authors: Mishra, Brajesh; Ghosh, Sajal; Kanjilal, Kakali
• Is Part Of: Telecommunications policy. Volume 44:Number 7(2020)
• Publication Date: 2020-08
• Subjects: Indian telecom sector -- Foreign direct investment -- Import dependence and import substitution -- Threshold cointegration -- NARDL -- Asymmetric causality; Telecommunication -- Periodicals; Télécommunications -- Périodiques; 384
• DOI: 10.1016/j.telpol.2020.101998
• Languages: English
• ISSNs: 0308-5961

Abstract

Abstract: The Indian telecom sector, post-liberalization, is characterized by the heavy dependence on the imports of telecom products, even though several policy initiatives have been taken by the government during the last three decades to reduce import dependence. This study investigates to what extent the policy measures adopted after 2012 have impacted the import, Foreign Direct Investment (FDI), and domestic manufacturing performance in the telecom sector. A series of non-linear time series techniques are employed to capture the complex dynamics among these variables. The outcomes of the study suggest that the import, FDI, and Index of Industrial Production (IIP) in the telecom sector share non-linear relationships that exhibit regime shifts, time-varying behavior, and asymmetry. The study highlights that the FDI drives the import and, in normal circumstances, FDI and imports have the potential to influence IIP in the telecom sector in the long-run. The findings indicate that the policy measures adopted by the government are justifiable as the import substitution strategies have the potential to get transmitted to the telecom sector in the future. Based on the empirical findings, the study proposes a set of policy measures, which should help the sector to grow intrinsically while lowering the import dependence. Highlights: Dynamics between FDI, IIP and import in Indian telecom sector is examined. Several non-linear time series techniques are employed to establish cointegation Regime-dependent causality directions among the variables are established. A set of policy measures are prescribed to lower the import dependence.