Horizontal Enabler: Telecom must be recognised as the bedrock of a $5 trillion India

India today stands at a decisive moment in its economic journey. The ambition of becoming a $5 trillion economy is no longer an aspiration only; it is a near-term national objective. What is equally clear is that this growth will not be driven by traditional sectors alone. Digital public infrastructure, data-driven services, artificial intelligence (AI)-enabled enterprises and digitally empowered citizens will shape the next phase of India’s development. At the centre of this transformation lies an often overlooked foundation: telecom networks.

For decades, telecom was viewed largely as a consumer service, a utility pipe that enabled voice calls and later, data access. That framing no longer holds. Telecom has evolved into the invisible rails on which India’s digital economy runs. Every Unified Payments Interface (UPI) transaction, every Aadhaar authentication, every DigiLocker document, every Open Network for Digital Commerce (ONDC) order and every emerging AI application depends on resilient, high-capacity networks. India’s growth story today runs on fibre, spectrum and software as much as it does on steel, power and cement.

Yet, even as the economy has changed, policy frameworks still tend to treat telecom as a standalone revenue-generating vertical. This gap between economic reality and regulatory thinking is one of the most important challenges India must address to fully unlock its digital dividend.

Telecom as the horizontal enabler of India’s digital transformation

The defining feature of today’s telecom networks is their horizontality. They no longer serve one sector at a time. Instead, they cut across the economy, enabling productivity, inclusion and innovation everywhere. This horizontal role spans the following areas:

• AI and the emerging data economy: AI is rapidly becoming a core input for growth across banking, manufacturing, healthcare, governance and consumer services. Policymakers and regulators have rightly highlighted that telecom networks will form the carrier layer for this AI-driven future. Large language models, real-time analytics and cloud-native applications all depend on secure, low-latency and high-capacity connectivity between data centres, enterprises and users. Under the national AI initiatives, investments in compute infrastructure and graphics processing unit capacity will generate real value only when supported by networks that can move massive volumes of data reliably. AI workloads are not static. They demand continuous connectivity across geographies, which places telecom at the heart of India’s AI ambitions.
• Industry 4.0 and smart manufacturing: Manufacturing and infrastructure are entering an era defined by automation, robotics and data-led decision-making. Industrial internet of things (IoT) and ultra-reliable low-latency communication enable smart factories, autonomous logistics, predictive maintenance and real-time quality control. These capabilities are no longer limited to large enterprises. Micro, small and medium enterprises (MSMEs), ports, warehouses, mines, utilities and even agriculture are adopting connected systems to improve efficiency and competitiveness. Telecom, in this context, is not just a sector, it is the horizontal layer that raises productivity across the entire industrial ecosystem.
• Digital public infrastructure and e-governance: India’s digital public infrastructure (DPI) has become a global benchmark for scale and inclusion. Platforms such as UPI, Aadhaar, DigiLocker, CoWIN, FASTag and ONDC have transformed how citizens interact with the state and with markets. According to government and industry estimates, digital platforms now reach deep into Tier II cities, towns and rural areas, expanding financial inclusion and service delivery. None of this is possible without affordable, ubiquitous and reliable connectivity. Telecom determines whether DPI delivers uniform benefits or reinforces digital divides. In this sense, telecom is no longer one more sector in the economy. It is the horizontal fabric that makes every sector more efficient and inclusive.

The policy-economy mismatch

Despite this expanded role, telecom regulation in India continues to be shaped by a legacy mindset, as operators continue to face one of the highest cumulative levy burdens globally through licence fees, spectrum charges and indirect taxes. For a capital-intensive sector that must continuously reinvest in networks, this creates structural pressure. The issue is not profitability. It is the ability to sustain long-term investment in coverage, capacity and quality. This challenge is evident in multiple areas:

• A vertical revenue lens on a horizontal enabler: Telecom is still often treated as a convenient source of non-tax revenue through spectrum auctions and recurring levies. This stands in contrast to how other foundational infrastructure such as roads, power and railways are approached. Those sectors are designed to maximise economic spillovers rather than near-term fiscal extraction. Telecom today plays a similar enabling role, multiplying productivity across sectors. Continuing to apply a vertical revenue lens risks underinvesting in an asset that underpins national growth.
• Rising obligations without aligned cost structures: Operators are expected to expand networks into rural and low-income areas, ensure resilience for critical public platforms and carry ever-growing traffic generated by large digital platforms and AI applications. Yet, these responsibilities are not matched by commensurate reductions in regulatory costs or by contributory mechanisms from major traffic generators. The result is a growing imbalance that ultimately affects network expansion and quality.

Rethinking telecom as horizontal infrastructure

If telecom is to serve as the bedrock of a $5 trillion digital economy, regulatory thinking must evolve in step with economic reality. Achieving this will require targeted reforms:

• A growth-oriented approach to spectrum: Spectrum should be viewed as a national productivity asset rather than a short-term fiscal instrument. Policy must focus on long-term economic value by ensuring reasonable reserve prices, predictable auction timelines and the availability of contiguous spectrum blocks essential for advanced networks. Flexibility and technology neutrality will allow operators to optimise spectrum use and prepare for 5G-Advanced and future 6G technologies.
• Rationalising levies and licence frameworks: Licence fees and regulatory charges should recover administrative costs rather than constrain investment. Revisiting legacy levies and refining revenue definitions can significantly improve reinvestment capacity without undermining public finances. Such reforms are not about concessions. They are about aligning regulatory structures with the economic role telecom now plays.
• Towards fair contribution models: Globally, regulators are debating how large digital platforms that generate disproportionate network traffic or large traffic generators can contribute to infrastructure sustainability. India is part of this conversation. Exploring co-investment in capacity, edge infrastructure and last-mile enhancement is about ensuring that the networks enabling digital innovation remain robust, scalable and inclusive.
• Integrating telecom into national infrastructure planning: Telecom must be explicitly recognised as core infrastructure in national planning and budgetary frameworks alongside roads, power and digital public platforms. This integrated view would align policy decisions with India’s long-term development priorities rather than short-term fiscal cycles.

The national dividend

Reframing telecom as horizontal infrastructure delivers benefits far beyond the sector itself. Lower regulatory burdens and rational spectrum pricing free up capital for deeper fibre penetration, denser 5G networks and future technologies. This improves connectivity for rural communities, MSMEs, start-ups and public services.

Stronger networks accelerate the adoption of AI, automation and IoT across manufacturing, healthcare, education and agriculture, amplifying productivity and employment. Equally important, a stable and forward-looking regulatory environment sends a powerful signal to global investors, technology companies and innovators that India is serious about digital-
led growth.

The future value of India’s economy will be defined by the speed and reliability with which information, transactions and ideas move across networks. Telecom is the connective tissue of this $5 trillion, AI-enabled and inclusive India. Recognising this reality is not a policy choice; it is an
economic necessity.