India's digital transformation in recent years has been nothing short of remarkable, revolutionizing consumer experiences with instant UPI payments, remote telemedicine consultations, and real-time cloud-driven responses. Behind these seamless interactions lie the robust telecom networks that now carry not just data, but the very momentum of India's economic growth.
The Foundation of Digital Public Infrastructure
Every layer of India's digital public infrastructure, from the Unified Payments Interface (UPI) and Open Network for Digital Commerce (ONDC) to smart logistics and digital healthcare systems, relies on resilient and scalable telecom networks. The Government of India has accelerated this transformation through significant reforms including the Telecommunications Act of 2023, the Production Linked Incentive (PLI) scheme, and the Draft National Telecom Policy for 2025. These initiatives collectively aim to achieve near-universal 4G and 5G coverage by 2030 while doubling the sector's contribution to the nation's GDP.
With this momentum building, Budget 2026 arrives at a crucial juncture to amplify these efforts by aligning fiscal policy with technological ambitions and national interests. Four critical areas will determine the sector's trajectory toward exponential progress.
Supercharging Innovation for Global Leadership
India has made substantial strides toward establishing itself as a global leader in 6G innovation, with the Honorable Prime Minister's 6G initiative marking a significant step in this direction. While the widespread deployment of 5G technology, covering 99.9% of districts across all States and Union Territories, demonstrates India's capability to implement cutting-edge technology at scale, the next logical step must involve fueling research and development (R&D).
India possesses abundant talent and capability in this domain. By offering targeted incentives, the nation can drive innovation at scale, potentially positioning itself among the top global R&D hubs. One effective approach would be expanding the scope of the PLI scheme to include a broader portfolio of telecom equipment. This expansion would strengthen domestic manufacturing capabilities, transitioning India from merely assembling hardware to designing advanced technologies, thereby ascending the global value chain.
Relieving Financial Stress on Operators
The telecom industry is inherently capital-intensive, with operators currently burdened by a 5% contribution to the Universal Service Obligation (USO) Fund and a 3% License Fee. These financial obligations strain cash flows that could otherwise be directed toward network expansion, modernization, and densification efforts.
A balanced solution might involve suspending these contributions until the existing corpus of approximately INR 86,000 crore is fully utilized. This approach would acknowledge the USO Fund's critical role in bridging the rural digital divide while providing much-needed financial leeway for telecom operators. Additionally, extending the carry-forward period for business losses from 8 to 16 years would offer relief, considering the long gestation periods typical of telecom projects.
Ending Tax Litigation Fatigue
Tax litigation remains a persistent challenge for the telecom sector. While various amnesty schemes have been introduced to resolve some disputes, a more comprehensive effort is needed to address industry-specific litigation patterns. For instance, ongoing debates regarding the characterization of telecom services highlight how ambiguity can persist despite years of adjudication.
Targeted legislative and tax clarifications could bring consistency and closure to these long-standing issues, fostering certainty and restoring investor confidence. For a capital-intensive sector like telecom, predictability is as crucial as incentives. Budget 2026 presents an opportunity to break this cycle of litigation through clear, forward-looking policies.
Addressing Indirect Tax Concerns
Finally, resolving the issue of accumulating GST credits in the telecom sector requires urgent attention. A streamlined approach might involve rationalizing the GST rate from the current 18% to 5% under the Reverse Charge Mechanism (RCM) for critical payments such as Spectrum Usage Charges and License Fees. This adjustment would achieve two important outcomes simultaneously: maintaining revenue neutrality for the government while significantly enhancing liquidity for telecom companies.
This reform is particularly vital for a sector where sustained investment is essential for advancing digital inclusion and supporting broader economic growth objectives.
Conclusion: From Ambition to Momentum
India's telecom journey has been characterized by bold ambition, with the sector now serving as the foundational pillar for both Digital India and the vision of Viksit Bharat. With strong fundamentals already in place, Budget 2026 can harmonize policy vision with fiscal pragmatism to transition from incremental improvements to exponential advancements. By addressing these four key areas, the budget can convert ambition into tangible momentum, positioning India as a global leader in next-generation connectivity and technological innovation.
