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RJIL’s entry led to $10 billion annual savings for India, says Institute for Competitiveness

April 06, 2018

According to a report by the Institute for Competitiveness, Reliance Jio Infocomm Limited’s (RJIL) entry in September 2016 led to $10 billion in annual savings for India and an unprecedented surge in data consumption. Institute for Competitiveness is Gurgaon-based Indian unit of the Institute for Strategy and Competitiveness at Harvard Business School.

RJIL has made data accessible and affordable, with average prices per GB of data dropping to Rs 10 from Rs 152, bringing the internet within the reach of a larger proportion of the Indian population. The report stated that within six months of RJIL’s launch, India became the highest mobile data user in the world, consuming over 1 billion GB of data every month compared to 200 million GB earlier.

It pointed that the yearly savings of the entire economy due to a rise in affordability of data prices comes out to be Rs $10 billion. It added that taking a conservative estimate that every consumer uses 1 GB of data a month, it derived the financial gains to the economy by estimating the benefit to all 350 million internet subscribers of the country.

The report highlighted that RJIL changed the basis of competition by offering free lifetime calls in an industry that derived 75 per cent of its revenue from voice services and made data the new focal point of competition. Moreover, it pointed that India has surpassed the US in terms of app downloads, making it second only to China, following RJIL’s launch

The report analysed RJIL’s entry to measure the impact of internet penetration on economic growth. The model used data from 18 states for the period 2004-14 and showed that a 10 per cent increase in internet penetration led to per capita GDP rising by 3.9 per cent, if all else remains constant.

According to the report, RJIL will help expand India’s per capita GDP by about 5.65 per cent, if everything else is kept constant in the economy. The effect of GDP growth due to higher internet penetration will not just be a contribution of the telecom sector but also various externalities arising out of the internet economy. Post-RJIL’s entry, consumers can experience a wide bouquet of digital applications that address needs such as education, health, entertainment and banking. Although India’s telecom industry has generally faced stiff competition, matters got aggravated after RJIL’s disruptive tariffs compelled operators to respond, putting pressure on their revenue and profit. These factors led to merger announcements by some companies and exits/buyouts by others.

The price wars have already compelled Vodafone India and Idea Cellular to merge, while Bharti Airtel bought out Telenor India and Tata Teleservices Limited’s consumer mobility business. Reliance Communications shut its wireless business while Aircel shrank its operations, leaving Bharti Airtel, RJIL and the emerging Vodafone-Idea combine as the dominant private telecom operators.


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