Telecom sector has experienced “renewables shock” in the form of Reliance Jio: Eco Survey II

According to the Economic survey II, the telecommunications sector has experienced its own version of the "renewables shock" in the form of a new entrant, Reliance Jio.

The survey said that "But like with the renewables shock, the near term implications for the viability of incumbents are serious: their profitability has come down dramatically."

"After launching of services by the new entrant in September 2016, the average revenue per user (ARPU) for the industry on aggregate has come down by 22 percent in 2016-17, compared to the long-term (December 2009-June 2016) ARPU, and by about 32 percent since September 2016," survey added.

The survey also pointed out that the share of the sector in non-performing assets (NPAs) had increased after new entrant (Reliance Jio).

"Though the total NPAs of the telecom sector in public sector banks has fallen to Rs. 2,335 crore in 2016-17 from Rs. 3,456 crore in 2015-16, the share of NPAs of infrastructure sector increased to 8.7 percent in 2016-17, from five percent in 2015-16," the Survey further added.

The survey added that not only was the banking system exposed to the telecom sector but also the government to whom the companies owe a variety of fees and taxes. "The telecom sector has experienced its own version of the 'renewables shock' in the form of a new entrant that has dramatically reduced prices for, and increased access to, data, thereby benefitting-at least in the short run- consumers," the Survey noted.

While mentioning about mobile industry in the country it said that the sector contributes to 6.5 percent ($140 billion) to the country's gross domestic product. It also employs over four million people, directly and indirectly.