A PROJECT REPORT

ON
development of service marketing
business in IndiaN conteXt
IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT OF
MASTER OF BUSINESS ADMINISTRATION (MBA) (SESSION 20092011) SUBMITTED TO G.B.T.U. LUCKNOW

UNDER THE SUPERVISION OF

PROF. S.K.GROVER
(Faculty of Management)

SUBMITTED BY:
Ankit Singhal

M.B.A. 4th Sem.

Roll No.-0911470009

GHAZIABAD

DECLARATION

I hereby declare that the project report entitled Development of Service Marketing Business
in Indian Context which is submitted in partial fulfilment of the requirement of the degree of
Masters of Business Administration to Gautam Buddha Technical University, is my original
work and has not been submitted earlier to this or any other Institution to the best of my
knowledge. The content of the report is based on second hand data and is collected from
internet sources, technical journals, magazines and books.

ANKIT SINGHAL
MBA 2ND YEAR
(2009-2011)

PREFACE

As a part of the partial fulfilment of MBA programme at INSTITUTE OF PROFESSIONAL

EXCELLENCE & MANAGEMENT, this project was undertaken under the mentorship of
Prof. S.K. GROVER.
As we all know SERVICE MARKETING is the trend followed by the world today. This
project report helped me to go through the details of the services and service marketing in the
field of Insurance and Telecommunication. While collecting the data I was able to understand
the past, present and the future of the Service marketing with its objectives, benefits and the
limitations.

The purpose of this study was to have the through knowledge about the past present and future
of the Service Marketing in Indian context.

ACKNOWLEDGEMENT
My project dealing with the Development of Service Marketing Business in Indian Context
provided me an exposure in Service Marketing. I owe gratefulness to some of the people for
being present all the time whenever the help was required in completion of the report.
At the outset Ill wish to acknowledge the entire staff of Institution (IPEM). Special
appreciation extended to Prof. S.K. GROVER (Faculty MBA) who helped me in shaping the
project and the research work.
A heart felt thanks to the staff, who helped in draft preparation of this report.

Date
Place

Ankit Singhal

TABLE OF CONTENTS
CERTIFICATE
DECLARATION
ACKNOWLEDGEMENT
PREFACE
1.

INTRODUCTION

1-52

2.

OBJECTIVE

52-53

3.

SCOPE OF THE STUDY

53-54

4.

USE AND IMPORTANCE OF THE STUDY

54-55

5.

RESEARCH METHODOLOGY

6.

ANALYSIS and DATA COLLECTED

7.

FINDINGS

65-66

8.

CONCLUSION

66-67

9.

RECOMMENDATIONS

67-68

10.

LIMITATIONS

68-69

11. BIBLIOGRAPHY

55-56
57-65

69-70

INTRODUCTION OF SERVICE MARKETING

lead in defining service as "activities, benefits or satisfaction which are offered for sale
or provided in connection with sale." This definition provides limited view of service
differently in valuing the output of a society. The definition does not provide for
valuing service involved in producing the tangible goods.

Philip Kotler and Boom (1984) Philip Kotler and Boom defined service as "any
activities or one party can offer to another that is essentially intangible and does not
result in the ownership of anything.Its production may or may not be tied to a physical
product.

Lehtinen (1983) According to Lehtinen a service product is "an activity or a series of

activities which take place in interaction with a contact person or a physical machine
and which provides consumer satisfaction." This definition recognises the services that
are provided by machines such as vending machines and ATMs, besides the services
provided by the contact persons.

NOW, WHY SERVICE MARKETING USED

The basic questions that confront everyone is why should there be a separate learning
on service marketing? Are the marketing concepts and techniques that are developed
for the manufacturing sector not applicable to services? Do services require distinctive
strategies in marketing? The answers to the questions provides the basic platform for
an understanding of service marketing
6

A different marketing approach is necessary for service marketing, because service

differ from goods in many respect. The following are the differences between physical
goods and services.

Services are intangible. Goods are intangible.

Services are heterogeneous where goods are homogeneous.

Services are produced in buyer-seller interactions. Goods are produced in the

factory.

Services can not be stored. Goods can be stored.

In the sale of services, transfer of ownership will not take place whereas in the case
of goods it does take place.

CHARACTERISTICS OF SERVICES
Services have basically six characteristics that greatly effect the design of marketing
programmes. They are:

Intangibility

Inseparability

Variability

Perishability

Customer participation

No ownership

SERVICES have increasingly assumed an important role in the economic development

of many countries, are emerging as service economies or service societies. An
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economy is called a service economy when the contribution of the service sector to the
GDP of the nation is more than 50 percent. USA was the first economy to be declared
as a service economy way back in 1948 with about 53 percent contribution of the
service sector to the GDP of the nation. There is an argument that the statistics of
service sectors contribution in many countries is a underestimation of the truth, since
the value of the service produced by manufactures of goods in the industrial sector is
not included in service output value. As such, there is a large hidden service sector
that is not classified under the service sector.

Services are becoming a critical source of wealth in many ways to the

economies. Economies experienced increase in employment with the growth in service
sector. While employment in the manufacturing sector is receding every year,
employment in the service sector rising. Even in times of economic recession, unlike in
the manufacturing sector, the service sector has kept employment up.

All human beings are service producers as well as consumers. We cannot imagine our
life in the absence of service. Transportation, education, communication, health care,
hospitality, entertainment, banking, information technology, electricity and a host of
services have become a part of our lives. In fact, the concept of services as old as
humankind and began when man started serving himself (self-servicing). When a part
of the society became affluent, it started utilising the services of other at a price. Then
services became a business proposition. Over the years, services have grown in
different ways throughout the world. However, until the beginning of the20th century,
the focus of the economies was to produce more and more tangible goods and sell

agricultural and manufactured product. Services such as accounting, banking,

insurance and transportation were considered as support to the manufacturing units.

In the beginning, throughout the world most services were in the public sector. Most
organisations enjoyed the status of monopoly. The situation of excessive demand over
supply and absence of competition or negligible competition led many service
organisations to be insensitive to the marketing literature developed until the 1970s
depicted manufacturing organisations and suggested that the same philosophies and
technology be applied to the service organisations also.

SERVICE SECTOR IN INDIAN ECONOMY

INDIA has been pursuing a planned approach for achieving economic growth and
development. Taking stock of the situation after independence, the economists of the
country developed a growth model. As a result, a planned era of developed were
categorised into sectors, in the order of priorities. They are: primary sector, secondary
sector and the tertiary sector. The primary sector includes agriculture, animal
husbandry, fishing and forestry. The secondary sector
Covers services, including distribution. The allotment of funds and the focus to the
primary sector and the next two focussed on the secondary sector. From the Sixth Five
Year Plan onwards, the focus has been on the tertiary sector. As a result, the service
sector started growing
The share of the agriculture sector in the GDP of the country was 57.1% in 1950-51,
that is, in the beginning of the planned era. Service occupy second position with 28.6%
and the contribution of industries to the GDP was 14.3%. There has been significant

change. The share of agriculture has down to 24.7%; the service sector became the
major contribution of industry to the GDP wad 26.4%.

REASONS FOR GROWTH OF SERVICESIN INDIA

The following are the reasons for growth of service in India.

Economic Affluence

Changing Role of Women

Cultural Changes

IT Revolution

Development of Market

Increased Consciousness of Health Care

Economic Liberalisation

Export Potential

Service Tax

KEY SERVICE BUSINESSES IN INDIA

In order to provide a better understanding on the development of services in India
and their significance in the economic prosperity of the country, a brief description of
the following key services is presented.

Insurance

Transport

Telecommunications

Software

10

Electricity

Postal services

Tourism

11

INSURANCE

In India, the insurance business started the beginning of the 19 th century. Marine
insurance was the earliest form of insurance that was transacted in India. Marine
insurance was followed by fire insurance. Many foreign companies established their
branches in India, looking at the business prospects. In 1907, the India Mercantile
Insurance company was established as the first company in the Indian origin. The
nationalisation of insurance business was a major milestone in the development of
insurance business in India. The life insurance business was nationalised in 1956 by
taking over 245 private insurers business. The General Insurance Corporation (GIC)
was established in 1972 by taking over the business of 107 insurers. The GIC has four
subsidiaries, namely National Insurance, Oriental Insurance, New India Assurance and
United India Insurance. Apart from Life Insurance Corporation (LIC) and GIC are the
most popular insurance companies in life and non-life insurance business respectively.
These two companies with a well-defined market system and distinguished portfolio
occupy the mega market share in the total insurance in India.

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In the absence of competition from the private sector, the insurance business in India
has not grown to its potential. As per the findings of the Malhotra Committee,
Insurance organisation have achieved only 22% market coverage. Indian insurance
market accupies 23rd position in the world insurance market, representing a poor 0.34%
(1988). The insurance market in India is underdeveloped. Out of one billion people in
India, only 35 million are covered by insurance
India is now recognised as a fast emerging market for insurance. The Indian insurance
market is expected to be 25 billion $ in 2010 on an assumption of 9.7% real annual
growth in the GDP. With the passing of the IRDA Act in 2000, the insurance market in
India has been opened to the private sector. As a result, as many as 34 insurance
companies entered the market, in collaboration with foreign companies by the end of
2002-03. The market has now have become highly competitive and challenging.

The LIC is the biggest personal insurance company in India. It has 7 zonal offices. 100
divisional offices and 2008 branch offices and 2008 branch offices spread all over the
country. The agency network of the corporation is considered the biggest and also the
strongest. The business of the company has grown significantly over the years. In
1956, the company has grown significantly over the years. In 1956, the company made
a business of Rs. 1200 crores. By the end of 1999, the volume of business rose to Rs.
20,000 crores and is expected to increase to Rs. 1,40,000 crores by 2010.
The GIC has a network of 4200 offices spread across the country. Its business has
increased from Rs. 185 crores in 1972 to Rs. 9,158 crores in 1999, recording a 50
times growth.

Some important definitions used in the project:

13

Before starting my project on life insurance I had to know what is life insurance, what
are the merits of life insurance why person need it and who can buy life insurance
policy, as we meet any persons for making him an advisor these are basic question
people ask as they are not much aware of these things.

What is Insurance?
It is used with reference to financial protection against a possibility, such as fire,
accidental damage, theft, or medical expenses: motor insurance, house hold insurance,
travel insurance, health insurance. Insurance is the protection of life and assets against
unforeseen circumstance.

It ensures protection of economic value of asset.

It is a social security tool

It is a risk transfer mechanism.

The insurance institute of India was established in 1955 for the purpose of imparting
insurance education to persons engaged or interested in insurance. The institute
conducts written examinations at various levels and arranges tuition services, both
oral and postal.
Mechanism: -

The basic mechanism of insurance works with the principle where people exposed to
the risks come together and pool funds to protect each and individual against risk.
Therefore, risk is spread out .The insurance companies collect money in advance and
creates a fund from which losses are paid.
14

Risk is defined as the possibility of adverse results flowing from any occurrence.
Insurance reduces the impact of risk on the owner and those who depend on the
asset .It must however be noted that, only economic or financial losses can be
compensated. For example, the emotional support that the breadwinner provides can
neither be evaluated nor compensated. However, the financial support can be
evaluated and compensated.

Why Insurance? or Need For Insurance

The need for insurance comes from the need to safeguard our family. If you care for
your familys needs you will definitely consider insurance. Today insurance has
become even more important due to the disintegration of the prevalent joint family
system, a system in which a number of generations co-existed in harmony, a system in
which a sense of financial security was always there as there were more earning
members. Times have changed and the nuclear family has emerged. Therefore you
need to save a part of income for the future too.
a) Temporary needs / threats
The original purpose of insurance remains an important element, namely providing
for replacement of income on death etc.
b) Regular Savings / Family Protection
Providing for one's family and oneself, as a medium to long term exercise (through a
series of regular payment of premiums). This has become more relevant in recent
times as people seek financial independence for their family.
15

c) Investment
Put simply, the building up of savings while safeguarding it from the ravages of
inflation. Unlike regular saving products, investment products are traditionally lump
sum investments, where the individual makes a one off payment.
d) Old age provision
Provision for later years becomes increasingly necessary, especially in a changing
cultural and social environment. One can buy a suitable insurance policy, which will
provide periodical payments in one's old age.
e) Children benefit
Provision for the education, marriage and start in life for the children.
f) Special needs provision
Protection against loss arising out of accident, disability, sickness, loan repayment on
death.

Who can buy an insurance policy?

Any person above 18 years of age, who is eligible to enter into a valid contract, can
go for an insurance policy.

Role of insurance in economic development: Insurance premium collected by insurance companies are invested in various
development projects. They provide the much needed cash for economic
development and growth. LIC (Life Insurance Corporation of India) used this money

16

to invest in infrastructure development e.g. housing loans, sewage systems and

electricity.

Role of insurance in nation building: Insurance benefits society by:

Providing relief to the insured from any mishap.

Reducing the burden of the government in providing relief to old citizens.

Placing large sums of money at the disposal of the government for

development of the economy.

Insurance company operations: The process of creating a product, making it available to consumers, ensuring
customer satisfaction is integral to an insurance company.

Creating the product: The functional areas that are involved in the creation of a product are: 1. Actuarial.
2. Accounting.
3. Marketing & Information systems.
4. Agents, brokers & sales representatives.
5. Underwriting.
8. Claim administration.
The creation of a product involves the following stages: 1. Idea generation.
2. Comprehensive business analysis.
17

3. Technical designing.
4. Implementation.
5. Product introduction.
6. Sales monitoring and review.
There are two different branches of insurance:

Life insurance.

Non-life or General insurance.

Life Insurance: A policy that will pay a specified sum to beneficiaries upon the death of the
insured.
Or
An agreement that guarantees the payment of a stated amount of monetary benefits
upon the death of the insured.
Life insurance is nothing but a contract with an insurance company under which the
insured (purchaser) pays a premium in exchange for coverage of specified losses. It
insures the life of a person. Human life is an income-generating asset. This asset can
be lost through unexpected death or made non-functional through sickness or
disability caused by an accident. There is no certainty that an accident will happen.
On the other hand there is a certainty that death will happen, but its timing is
uncertain.
Life insurance is a branch of insurance in which compensation is made available to
designated survivors of a deceased person, or to a person on their own survival after a
fixed term of years, in return for payments, or premiums. Life assurance is based on
the mathematics of probability, which determines the level of premium to be paid, and
18

on compound interest, which determines the growth over time, through investment, of
the fund constituted by the intake of premiums. The two together ensure an adequate
fund to provide the compensation required.
Is life insurance a saving instrument?
Life insurance is mainly considered as a saving instrument rather than an investment
avenue as it promotes compulsory savings besides reducing tax burden on the
policyholder. It is the only saving instrument, which covers the life risk besides giving
tax concession both at entry (premium paid) and at exit points. The section 10 (D) of
the income tax act totally exempts payment of tax on any amount received as bonus
against life insurance policies.
Life Insurance:

Does not protect the asset.

Does not prevent its loss.

It is not a contract of indemnity.

Only economic or financial losses can be compensated not emotional support.

Four main types of insurance policies:

Term assurance (Only in the term).

Whole-life assurance (Whole-life).

Pure endowment (Only on the survival of the selected term).

Annuity. (A form of pension in which an insurance company makes a series of

periodic payments to a person (or) his dependents over a no. of years. (Term)
in the return for the money paid to the insurance company either in a lump
sum (or) in instalments.

19

Non-Life (Or) General Insurance: It insures everything except life.

i.e. vehicle, electronic, furniture, medical, home (or) building, industry etc.
LIFE INSURANCE INDUSTRY IN INDIA
Many may not be aware that the life insurance industry of India is as old as it is in any
other part of the world. The first Indian Life Insurance Company was the Oriental life
Insurance Company, which was started in India in 1818 at Kolkata. A number of
players (over 250 in life and about 100 in non-life) mainly with regional focus
flourished all across the country. However, the Government of India, concerned by the
unethical standards adopted by some players against the consumers, nationalized the
industry in two phases in 1956 (life) and 1972 (non-life). The insurance business of
the country was then brought under two public sector companies, Life Insurance
Corporation of India (LIC) and General Insurance Corporation of India (GIC).

INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor
was formed to evaluate the Indian industry and give its recommendations. The
Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector.
The reforms were aimed at creating a more efficient and competitive financial
system suitable for the requirements of the economy keeping in mind the structural
changes currently underway and recognizing that insurance is an important part of the
overall financial system where it was necessary to address the need for similar
reforms
20

The committee came up with the following major provisions:Private Companies with a minimum paid up capital of Rs. 1 bn should be allowed to
enter the industry.
Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.
No Company should deal in both Life and General Insurance through a single entity.

Reforms were initiated with the passage of Insurance Regulatory and Development
Authority (IRDA) Bill in 1999. IRDA was set up as an independent regulatory
authority, which has put in place regulations in line with global norms.

CURRENT STATUS OF INSURANCE MARKET IN INDIA

The Life Insurance market in India is an underdeveloped market that was only tapped
by the state owned LIC till the entry of private insurers. The penetration of life
insurance products was 19 percent of the total 400 million of the insurable population.
The state owned LIC sold insurance as a tax instrument, not as a product giving
protection. Most customers were under- insured with no flexibility or transparency in
the products. With the entry of the private insurers the rules of the game have
changed.
The 16 private insurers in the life insurance market have already grabbed nearly 9
percent of the market in terms of premium income. Innovative products, smart
marketing and aggressive distribution, that's the triple whammy combination that has
enabled fledgling private insurance companies to sign up Indian customers faster than
anyone ever expected. Indians, who have always seen life insurance as a tax saving

21

device, are now suddenly turning to the private sector and snapping up the new
innovative products on offer.
Saturation of markets in many developed economies has made the Indian market even
more attractive for global insurance majors. With the per capital income in India
expected to grow at over 6% for the next 10 years and with improvement in
awareness levels, the demand for insurance is expected to grow at an attractive rate in
India.

22

Market Expansion:
There has been an overall expansion in the market. This has been possible due to
improved awareness levels thanks to the large number of advertising campaigns
launched by all the players. The scope for expansion is still unlimited as virtually all
the players are concentrating on large cities and towns except by LIC to an extent
there was no significant attempt to tap the rural markets.

New Product Offerings:

There has been a plethora of new players, mainly from the stable of their international
partners. Customers have tremendous choice from a large variety of products from
pure term insurance to unit-linked investment products. Customers are offered
unbundled products with a variety of benefits as riders from which they can choose.
More customers are buying products and services based on their true needs and not
just traditional money-back policies, which are not considered very appropriate for
long-term protection and savings.

Customer Service:
Not unexpectedly, this was one area that witnessed the most significant change with
the entry of new players. There is an attempt to bring in international best practices in
service and operational efficiency though use of latest technologies. Advice and need
based selling is emerging through much better trained sales force and advisors. There
is improvement in response and turnaround times in specific areas such as delivery of
first policy receipt, policy document, premium notice, final maturity payment,
settlement of claims etc.
23

Distribution Channels:

Till date insurance agents still remain the main source through which
insurance products are sold. The concept is very well established in the country like
India but still the increasing use of other sources is imperative. It therefore makes
sense to look at well balanced, alternatives channels of distribution.

LIC has already well established and have an extensive distribution channel
and presence. New players may find it expensive and time consuming to bring up a
distribution channel to have an advantage.
At present the distribution channels that are available in the market are:
Direct Selling
Corporate Agents
Group Selling
Brokers and Cooperative Societies
Bancassurance
To make all these channels a success the companies have to be very alert and skillful
to know how to use these channels in a proper way. Bancassurance is one of the most
upcoming channels of distribution.

24

THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory body in
April 2000 has fastidiously stuck to its schedule of framing regulations and registering
the private sector insurance companies.

The other decisions taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies, was the launch of the
IRDAs online service for issue and renewal of licenses to agents.

The approval of institutions for imparting training to agents has also ensured that the
insurance companies would have a trained workforce of insurance agents in place to
sell their products, which are expected to be introduced by early next year.

Since being set up as an independent statutory body the IRDA has put in a framework
of globally compatible regulations. In the private sector 16 life insurance and 10
general insurance companies have been registered.
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA
The important functions of IRDA are as follows:
To exercise all powers & functions of controller of Insurance.
Protection of the interest of the policyholders.
To issue, renew, modify, withdraw or suspend certificate of
registration.

25

 To specify requisite qualification & training for insurance

intermediaries & agents
To promote & regulate professional organization connected with
Insurance.
To conduct Inspection/investigations etc.
To prescribe method of Insurance Accounting.
To regulate investment of funds & margins of solvency.
To adjudication upon disputes.
To conduct inspection & audit of insurers, intermediaries & other
organizations concerned with Insurance.

26

27

Introduction
The telecom services have been recognized the world-over as an important tool for
socio-economic development for a nation. It is one of the prime support services
needed for rapid growth and modernization of various sectors of the economy. Indian
telecommunication sector has undergone a major process of transformation through
significant policy reforms, particularly beginning with the announcement of NTP
1994 and was subsequently re-emphasized and carried forward under NTP 1999.
Driven by various policy initiatives, the Indian telecom sector witnessed a complete
transformation in the last decade. It has achieved a phenomenal growth during the last
few years and is poised to take a big leap in the future also.
Status of Telecom Sector
The Indian Telecommunications network with 621 million connections (as on March
2010) is the third largest in the world. The sector is growing at a speed of 45% during
the recent years. This rapid growth is possible due to various proactive and positive
decisions of the Government and contribution of both by the public and the private
sectors. The rapid strides in the telecom sector have been facilitated by liberal
policies of the Government that provides easy market access for telecom equipment
and a fair regulatory framework for offering telecom services to the Indian consumers
at affordable prices. Presently, all the telecom services have been opened for private
participation. The Government has taken following main initiatives for the growth of
the Telecom Sector:
Liberalization
The process of liberalization in the country began in the right earnest with the
announcement of the New Economic Policy in July 1991. Telecom equipment
manufacturing was delicensed in 1991 and value added services were declared open
28

to the private sector in 1992, following which radio paging, cellular mobile and other
value added services were opened gradually to the private sector. This has resulted in
large number of manufacturing units been set up in the country. As a result most of the
equipment used in telecom area is being manufactured within the country. A major
breakthrough was the clear enunciation of the governments intention of liberalizing
the telecom sector in the National Telecom Policy resolution of 13th May 1994.
National Telecom Policy 1994
In 1994, the Government announced the National Telecom Policy which defined
certain important objectives, including availability of telephone on demand, provision
of world class services at reasonable prices, improving Indias competitiveness in
global market and promoting exports, attractive FDI and stimulating domestic
investment, ensuring Indias emergence as major manufacturing / export base of
telecom equipment and universal availability of basic telecom services to all villages.
It also announced a series of specific targets to be achieved by 1997.
Telecom Regulatory Authority of India (TRAI)
The entry of private service providers brought with it the inevitable need for
independent regulation. The Telecom Regulatory Authority of India (TRAI) was, thus,
established with effect from 20th February 1997 by an Act of Parliament, called the
Telecom Regulatory Authority of India Act, 1997, to regulate telecom services,
including fixation/revision of tariffs for telecom services which were earlier vested in
the Central Government.
TRAIs mission is to create and nurture conditions for growth of telecommunications
in the country in manner and at a pace, which will enable India to play a leading role
in emerging global information society. One of the main objectives of TRAI is to
provide a fair and transparent policy environment, which promotes a level playing
29

field and facilitates fair competition. In pursuance of above objective TRAI has issued
from time to time a large number of regulations, orders and directives to deal with
issues coming before it and provided the required direction to the evolution of Indian
telecom market from a Government owned monopoly to a multi operator multi
service open competitive market. The directions, orders and regulations issued cover a
wide range of subjects including tariff, interconnection and quality of service as well
as governance of the Authority.
The TRAI Act was amended by an ordinance, effective from 24 January 2000,
establishing a Telecommunications Dispute Settlement and Appellate Tribunal
(TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT
was set up to adjudicate any dispute between a licensor and a licensee, between two or
more service providers, between a service provider and a group of consumers, and to
hear and dispose of appeals against any direction, decision or order of TRAI.
New Telecom Policy 1999
The most important milestone and instrument of telecom reforms in India is the New
Telecom Policy 1999 (NTP 99). The New Telecom Policy, 1999 (NTP-99) was
approved on 26th March 1999, to become effective from 1st April 1999. NTP-99 laid
down a clear roadmap for future reforms, contemplating the opening up of all the
segments of the telecom sector for private sector participation. It clearly recognized
the need for strengthening the regulatory regime as well as restructuring the
departmental telecom services to that of a public sector corporation so as to separate
the licensing and policy functions of the Government from that of being an operator.
It also recognized the need for resolving the prevailing problems faced by the
operators so as to restore their confidence and improve the investment climate.

30

Key features of the NTP 99 include:

Strengthening of Regulator.
National long distance services opened to private operators.

International Long Distance Services opened to private sectors.

Private telecom operators licensed on a revenue sharing basis, plus a onetime entry fee. Resolution of problems of existing operators envisaged.
Direct interconnectivity and sharing of network with other telecom
operators within the service area was permitted.
Department of Telecommunication Services (DTS) corporatized in 2000.

Spectrum Management made transparent and more efficient.

All the commitments made under NTP 99 have been fulfilled; each one of them, in
letter and spirit, some even ahead of schedule, and the reform process is now
complete with all the sectors in telecommunications opened for private competition.
National Long Distance
National Long Distance opened for private participation. The Government announced
on 13.08.2000 the guidelines for entry of private sector in National Long Distance
Services without any restriction on the number of operators. The DOT guidelines of
license for the National Long Distance operations were also issued.
Highlights - NLD Guidelines

31

 Unlimited entry for carrying both inter-circle and intra-circle calls.

Total foreign equity (including equity of NRIs and international funding
agencies) must not exceed 74%. Promoters must have a combined net
worth of Rs.25 million.
Private operators will have to enter into an arrangement with fixed-service
providers within a circle for traffic between long-distance and shortdistance charging centres.
Seven years time frame set for rollout of network, spread over four phases.
Any shortfall in network coverage would result in encashment and
forfeiture of bank guarantee of that phase.
Private operators to pay one-time entry fee of Rs.25 million plus a
Financial Bank Guarantee (FBG) of Rs.200 million. The revenue sharing
agreement would be to the extent of 6%.
Private operators allowed to set up landing facilities that access submarine
cables and use excess bandwidth available.
Licence period would be for 20 years and extendable by 10 years.

International Long Distance

In the field of international telephony, India had agreed under the GATS to review its
opening up in 2004. However, open competition in this sector was allowed with effect
from April 2002 itself. There is now no limit on the number of service providers in
this sector. The licence for ILD service is issued initially for a period of 20 years,

32

with

automatic extension of the licence by a period of 5 years. The applicant

company pays one-time non-refundable entry fee of Rs.25 million plus a bank
guarantee of Rs.250 million, which will be released on fulfillment of the roll out
obligations. The annual licence fee including USO contribution is @ 6% of the
Adjusted Gross Revenue and the fee/royalty for the use of spectrum and possession of
wireless telegraphy equipment are payable separately. At present 24 ILD service
providers (22 Private and 2 Public Sector Undertaking) are there. As per current roll
out obligations under ILD license, the licensee undertakes to fulfill the minimum
network roll out obligations for installing at least one Gateway Switch having
appropriate interconnections with at least one National Long Distance service
licensee. There is no bar in setting up of Point of Presence (PoP) or Gateway switches
in remaining location of Level I Taxs. Preferably, these PoPs should conform to Open
Network Architecture (ONA) i.e. should be based on internationally accepted
standards to ensure seamless working with other Carriers Network.
Universal Service Obligation Fund
Another major step was to set up the Universal Service Obligation Fund with effect
from April 1, 2002. An administrator was appointed for this purpose. Subsequently,
the Indian Telegraph (Amendment) Act, 2003 giving statutory status to the Universal
Service Obligation Fund (USOF) was passed by both Houses of Parliament in
December 2003. The Fund is to be utilized exclusively for meeting the Universal
Service Obligation and the balance to the credit of the Fund will not lapse at the end
of the financial year. Credits to the Fund shall be through Parliamentary approvals.
The Rules for administration of the Fund known as Indian Telegraph (Amendment)
Rules, 2004 were notified on 26.03.2004.

33

The resources for implementation of USO are raised through a Universal Service
Levy (USL) which has presently been fixed at 5% of the Adjusted Gross Revenue
(AGR) of all Telecom Service Providers except the pure value added service
providers like Internet, Voice Mail, E-Mail service providers etc. In addition, the
Central Govt. may also give grants and loans. An Ordinance was promulgated on
30.10.2006 as the Indian Telegraph (Amendment) Ordinance 2006 to amend the
Indian Telegraph Act, 1885 in order to enable support for mobile services, broadband
connectivity, general infrastructure and pilot project for new technological
developments in rural and remote areas of the country. Subsequently, an Act has been
passed on 29.12.2006 as the Indian Telegraph (Amendment) Act 2006 to amend the
Indian Telegraph Act, 1885.
USFO has initiated action to bring mobile services within the ambit of Universal
Service Obligation Fund (USOF) activities. Under this initiative, 7387 mobile
infrastructure sites are being rolled out, in the first phase, across 500 districts and 27
states of India. This scheme will provide mobile services to approximately 0.2 million
villages which where hitherto deprived of the same. As on 30th June 2010, 7183
shared towers have been set up under the First Phase of the scheme. The USOFof
DOT has proposed to set up about 10,128 additional towers in order to extend the
mobile coverage in other uncovered areas under the Second Phase of the Scheme.
Unified Access Services
Unified access license regime was introduced in November2003. Unified Access
Services operators are free to provide, within their area of operation, services, which
cover collection, carriage, transmission and delivery of voice and/or non-voice
messages over Licensees network by deploying circuit, and/or packet switched
34

equipment. Further, the Licensee can also provide Voice Mail, Audiotex services,
Video Conferencing, Videotex, E-Mail, Closed User Group (CUG) as Value Added
Services over its network to the subscribers falling within its service area on nondiscriminatory basis. The country is divided into 23 Service Areas consisting of 19
Telecom Circle and 4 Metro Service Areas for providing Unified Access Services
(UAS). The licence for Unified Access Services is issued on non-exclusive basis, for a
period of 20 years, extendable by 10 years at one time within the territorial
jurisdiction of a licensed Service Area. The licence Fee is 10%, 8% & 6% of Adjusted
Gross Revenue (AGR) for Metro and Category `A, Category `B and Category `C
Service Areas, respectively. Revenue and the fee/royalty for the use of spectrum and
possession of wireless telegraphy equipment are payable separately. The frequencies
are assigned by WPC wing of the Department of Telecommunications from the
frequency bands earmarked in the applicable National Frequency Allocation Plan and
in coordination with various users subject to availability of scarce spectrum.
Internet Service Providers (ISPs)
Internet service was opened for private participation in 1998 with a view to encourage
growth of Internet and increase its penetration. The sector has seen tremendous
technological advancement for a period of time and has necessitated taking steps to
facilitate technological ingenuity and provision of various services. The Government
in the public interest in general, and consumer interest in particular, and for proper
conduct of telegraph and telecom services has decided to issue the new guidelines for
grant of licence of Internet services on non-exclusive basis. Any Indian company with
a maximum foreign equity of 74% is eligible for grant of licence.

35

Broadband Policy 2004

Recognizing the potential of ubiquitous Broadband service in growth of GDP and
enhancement in quality of life through societal applications including tele-education,
tele-medicine, e-governance, entertainment as well as employment generation by way
of high-speed access to information and web based communication; Government has
announced Broadband Policy in October 2004. The main emphasis is on the creation
of infrastructure through various technologies that can contribute to the growth of
broadband services. These technologies include optical fibre, Asymmetric Digital
Subscriber Lines (ADSL), cable TV network; DTH etc. Broadband connectivity has
been defined as Always On with the minimum speed of 256 kbps. It is estimated that
the number of broadband subscribers would be 20 million by 2010. With a view to
encourage Broadband Connectivity, both outdoor and indoor usage of low power WiFi and Wi-Max systems in 2.4 GHz-2.4835 GHz band has been delicensed. The use of
low power indoor systems in 5.15-5.35 GHz and 5.725-5.875 GHz bands has also
been delicensed in January 05. The SACFA/WPC clearance has been simplified. The
setting up of National Internet Exchange of India (NIXI) would enable bringing down
the international bandwidth cost substantially, thus making the broadband
connectivity more affordable.
The prime consideration guiding the Policy includes affordability and reliability of
Broadband services, incentives for creation of additional infrastructure, employment
opportunities, induction of latest technologies, national security and brings in
competitive environment so as to reduce regulatory interventions.
By this new policy, the Government intends to make available transponder capacity
for VSAT services at competitive rates after taking into consideration the security
requirements. The service providers permitted to enter into franchisee agreement with
36

cable TV network operators. However, the Licensee shall be responsible for

compliance of the terms and conditions of the licence. Further in the case of DTH
services, the service providers permitted to provide Receive-Only-Internet Service.
The role of other facilitators such as electricity authorities, Departments of ITs of
various State Governments, Departments of Local Self Governments, Panchayats,
Departments of Health and Family Welfare, Departments of Education is very
important to carry the advantage of broadband services to the users particularly in
rural areas.
Target has been set for 20 million broadband connections by 2010 and providing
Broadband connectivity to all secondary and higher secondary schools, public health
institutions and panchayats by 2010.
In rural areas, connectivity of 512 KBPS with ADSL 2 plus technology (on wire) will
be provided from about 20,000 existing exchanges in rural areas having optical fibre
connectivity. Community Service Centres, secondary schools, banks, health centres,
Panchayats, police stations etc. can be provided with this connectivity in the vicinity
of above-mentioned 20,000 exchanges in rural areas. DOT will be subsidizing the
infrastructure cost of Broadband network through support from USO Fund to ensure
that Broadband services are available to users at affordable tariffs.
Tariff Changes
The Indian Telecom Sector has witnessed major changes in the tariff structure. The
Telecommunication Tariff Order (TTO) 1999, issued by regulator (TRAI), had begun
the process of tariff balancing with a view to bring them closer to the costs. This
supplemented by Calling Party Pay (CPP), reduction in ADC and the increased
37

competition, has resulted in a dramatic fall in the tariffs. ADC has been abolished for
all calls w.e.f. 1st October 2008.

The peak National Long Distance tariff for above 1000 Kms. in 2000 has
come down from US$ 0.67 per minute to US$ 0.02 per minute in 2009.

The International Long Distance tariff from US$ 1.36 per minute in 2000 to
US$ 0.16 per minute in 2009 for USA, Canada & UK.

The mobile tariff for local calls has reduced from US$0.36 per minute in 1999
to US$ 0.009 - US$ 0.04 per minute in 2009.
The Average Revenue Per User of mobile is between US$ 5.06 - US$ 7.82 per
month
Foreign Direct Investment (FDI)

In Basic, Cellular Mobile, Paging and Value Added Service, and Global
Mobile Personal Communications by Satellite, Composite FDI permitted is
74% (49% under automatic route) subject to grant of license from Department
of Telecommunications subject to security and license conditions. (para 5.38.1
to 5.38.4 of consolidate FDI Policy circular 1/2010 of DIPP)

FDI upto 74% (49% under automatic route) is also permitted for the
following:

Radio Paging Service

Internet Service Providers (ISP's)

FDI upto 100% permitted in respect of the following telecom services: -

38

 Infrastructure Providers providing dark fibre (IP Category I);

Electronic Mail; and

Voice Mail

Subject to the conditions that such companies would divest 26% of their equity in
favor of Indian public in 5 years, if these companies were listed in other parts of the
world.

In telecom manufacturing sector 100% FDI is permitted under automatic

route.

The Government has modified method of calculation of Direct and

Indirect

Foreign

Investment

in

sector

with

caps

and

have

also

issued guidelines on downstream investment by Indian Companies

Guidelines for transfer of ownership or control of Indian companies in

sectors with caps from resident Indian citizens to non-resident entities have
been issued.

Investment Opportunities and Incentives

An attractive trade and investment policy and lucrative incentives for foreign
collaborations have made India one of the worlds most attractive markets for the
telecom equipment suppliers and service providers.
No industrial license required for setting up manufacturing units for telecom
equipment.

39

 100% Foreign Direct Investment (FDI) is allowed through automatic route for
manufacturing of telecom equipments.
Payments for royalty, lumpsum fee for transfer of technology and payments
for use of trademark/brand name on the automatic route.
Foreign equity of 74% (49 % under automatic route) permitted for telecom
services - basic, cellular mobile, paging, value added services, NLD, ILD,
ISPs - and global mobile personal communications by satellite.
Full reparability of dividend income and capital invested in the telecom
sector.
Network Expansion
The telecom sector has shown robust growth during the past few years. It has also
undergone a substantial change in terms of mobile versus fixed phones and public
versus private participation. The following table shows the growth trend of telecom
sector from last five years:
The number of telephones has increased from 54.63 million as on 31.03.2003 to
621.28 million as on 31.03.2010. Wireless subscribers increased from 13.3 million as
on 31.03.2003 to 584.32 million as on 31.03.2010. Whereas, the fixed line
subscribers decreased from 41.33 million in 31.03.2003 to 36.95 million in
31.03.2010. The broadband subscribers grew from a meager 0.18 million to 8.76
million as on 31.03.2010.
Trend in Tele-density
Tele-density in the country increased from 5.11% in 2003 to 52.74 % in March 2010.
In the rural area tetedensity increased from 1.49% in Mar 2003 to 24.31% in March
40

2010 and in the urban areas it is increased from 14.32% in Mar 2003 to119.45% in
March 2010.This indicates a rising trend of Indian telecom subscribers.
Rural Telephony
Apart from the 200.77million fixed and WLL connections on March 2010 provided in
the rural areas, 570000 uncovered VPTs have been provided as on March 2010. Thus,
96% of the villages in India have been covered by the VPTs. More than 3 lakh PCOs
are also providing community access in the rural areas. Further, Mobile Gramin
Sanchar Sewak Scheme (GSS) a mobile Public Call Office (PCO) service is provided
at the doorstep of villagers. At present, 2772 GSSs are covering 12043 villages. Also,
to provide Internet service, Sanchar Dhabas (Internet Kiosks) have been provided in
more than 3500 Block Headquarters out of the total 6337 Blocks in the country. The
target of 80 million rural connections by 2010 have already met during year 2008
itself. USOF subsidy support scheme is also being utilized for sharing wireless
infrastructure in rural areas with about 19,000 towers by 2010.
Performance of telecom equipment manufacturing sector
As a result of Government policy, progress has been achieved in the manufacturing of
telecom equipment in the country. There is a significant telecom equipmentmanufacturing base in the country and there has been steady growth of the
manufacturing sector during the past few years. The figures for production and export
of telecom equipment are shown in table given below:
(Rs. in crore)

Year

Production

Export
41

2002-03

14400

402

2003-04

14000

250

2004-05

16090

400

2005-06

17833

1500

2006-07

23656

1898

2007-08

41270

8131

2008-09

48800
50000

11000
13500

(projected @ 18%)

(projected @ 25%)

2009-10
Rising demand for a wide range of telecom equipment, particularly in the area of
mobile telecommunication, has provided excellent opportunities to domestic and
foreign investors in the manufacturing sector. The last two years saw many renowned
telecom companies setting up their manufacturing base in India. Ericsson set up GSM
Radio Base Station Manufacturing facility in Jaipur. Elcoteq set up handset
manufacturing facilities in Bangalore. Nokia and Nokia Siemens Networks have set
up their manufacturing plant in Chennai. LG Electronics set up plant of
manufacturing GSM mobile phones near Pune. Ericsson launched their R&D Centre
in Chennai. Flextronics set up an SEZ in Chennai. Other major companies like
Foxconn, Aspcom, Solectron etc have decided to set up their manufacturing bases in
India. The Government has already set up Telecom Equipment and Services Export
Promotion Council and Telecom Testing and Security Certification Centre (TETC). A
large number of companies like Alcatel, Cisco have also shown interest in setting up
their R&D centers in India. With above initiatives India is expected to be a
manufacturing hub for the telecom equipment.

42

Opportunities
India offers an unprecedented opportunity for telecom service operators, infrastructure
vendors, manufacturers and associated services companies. A host of factors are
contributing to enlarged opportunities for growth and investment in telecom sector:
An expanding Indian economy with increased focus on the services sector
Population mix moving favorably towards a younger age profile

Urbanization with increasing incomes

Investors can look to capture the gains of the Indian telecom boom and diversify their
operations outside developed economies that are marked by saturated telecom markets
and lower GDP growth rates.
Inflow of FDI into Indias telecom sector during April 2000 to Feb. 2010 was about Rs
405,460 million. Also, more than 8 per cent of the approved FDI in the country is
related to the telecom sector.

43

Research & Development

India has proven its dominance as a technology solution provider. Efforts are being
continuously made to develop affordable technology for masses, as also
comprehensive security infrastructure for telecom network. Research is on for
the preparation of tested infrastructure for enabling interoperability in Next
Generation Network. It is expected that the telecom equipment R & D shall be
doubled by 2010 from present level of 15%. Modern technologies inductions
are being promoted. Pilot projects on the existing and emerging technologies
have been undertaken including WiMax, 3G etc. Emphasis is being given to
technologies having potential to improve rural connectivity. Also to beef up
R&D infrastructure in the telecom sector and bridge the digital divide, cellular
operators, top academic institutes and the Government of India together set up
the Telecom Centres of Excellence (COEs). The main objectives of the COEs
are as follows:
Achieve Telecom Vision 2010 that stipulates a definite growth model and take
it beyond.
Secure Information Infrastructure that is vital for countrys security.
Capacity Building through Knowledge for a sustained growth.
Support Planned Predictive Growth for stability.
Reduce Rural Urban Digital Divide to reach out to masses.
Utilize available talent pool and create environment for innovation.
Management of National Information Infrastructure (NII) during Disaster
Cater the requirement of South East Asia as Regional Telecom Leader

44

To achieve these objectives seven Centre of Excellences in various field of Telecom

have been set up with the support of Government and the participation of
private/public telecom operators as sponsors, at the selected academic
institutions of India. The details of COEs are enumerated below: - TCOEs
Centres

Associate
Sr. No.

Sponsor

Work Assigned

Institute
Vodafone Essar & TexasNext Generation Network (NGN) & Network
1
2

IIT Kharagpur
IIT Delhi
IISC

Instruments
Bharti Airtel

Technology
Telecom Technology & Management

(Indian

Institute
3

of

Information Security & Disaster Management of

Aircel & Texas instrument

Science),

Infrastructure

Bangalore
Technology Integration, Multimedia & Computational
4

IIT Kanpur

5
6

IIT Chennai
IIT Mumbai

IIM Ahmedabad

BSNL & Alphion

Mathematics
Reliance Communication Telecom Infrastructure & Energy
Tata Teleservices
Rural Applications
Policy, Regulation, Governance, Customer care &
Idea Cellular
Marketing

3G & Broadband Wireless Services (BWA)

The government has in a pioneering decision, decided to auction 3G & BWA
spectrum. The broad policy guidelines for 3G & BWA have already been issued on
1stAugust 2008 and allotment of spectrum has been planned through simultaneously
ascending e-auction process by a specialized agency. New players would also be able
to bid thus leading to technology innovation, more competition, faster roll out and
ultimately greater choice for customers at competitive tariffs. The 3G will allow
telecom companies to offer additional value added services such as high resolution
45

video and multi media services in addition to voice, fax and conventional data
services with high data rate transmission capabilities. BWA will become a
predominant platform for broadband roll out services. It is also an effective tool for
undertaking social initiatives of the Government such as e-education, telemedicine, ehealth and e-Governance. Providing affordable broadband, especially to the suburban
and rural communities is the next focus area of the Department.
BSNL & MTNL have already been allotted 3G & BWA spectrum with a view to
ensuring early roll out of 3G & WiMax services in the country. They will pay the
same price for the spectrum as discovered through the auction. While, Honble Prime
Minister launched the MTNLs 3G mobile services on the inaugural function of India
Telecom 2008 held on 11th December 2008, BSNL launched its countrywide 3G
services from Chennai, in the southern Tamil Nadu state on 22nd February 2009.
Mobile Number Portability (MNP)
Mobile Number Portability (MNP) allows subscribers to retain their existing
telephone number when they switch from one access service provider to another
irrespective of mobile technology or from one technology to another of the same or
any other access service provider. The Government has announced the guidelines for
Mobile Number Portability (MNP) Service Licence in the country on 1 st August 2008
and has issued a separate Licence for MNP service w.e.f. 20.03.2009. The Department
of Telecommunication (DoT) has already issued licences to two global companies
(M/s Syniverse Technologies Pvt. Ltd. and M/s MNP Interconnection Telecom
Solutions India Pvt. Ltd.) for implementing the service. MNP is to be implemented in
whole country in one go by 31.10.2010

46

Targets Set By the Government

1. Network expansion
800 million connections by the year 2012.

2. Rural telephony
200 million rural subscribers by 2012
Reduce urban-rural digital divide from present 25:1 to 5:1 by 2010.

3. Broadband
20 million Broadband connections by 2010
Broadband with minimum speed of 1 mbps.

Broadband coverage for all secondary & higher secondary schools and public
health care centres by the end of year 2010.
Broadband coverage for all Grampanchayats by the year 2010

Broadband on demand is every village by 2012

4. Manufacturing
Making India a hub for telecom manufacturing by facilitating more and more
telecom specific SEZs.
Quadrupling production in 2010.

Achieving exports of 10 billion during 11th Five year plan.

47

5. Research & Development

Pre-eminence of India as a technology solution provider.
Comprehensive security infrastructure for telecom network.

Tested infrastructure for enabling interoperability in Next Generation

Network.
8. International Bandwidth
Facilitating availability of adequate international bandwidth at competitive
prices to drive ITES sector at faster growth.
Indian Telecommunications at a glance
(As on 31st March 2010)
Rank in world in network size

3rd

Tele density (per hundred populations)

52.74

Telephone connection (In million)

Fixed

36.95

Mobile

548.32

Total

621.28

Village Public Telephones inhabited (Out of

5,69,385

5,93,601 uncovered villages)

Foreign Direct Investment (in million) (from April

4070

2000 till March 2010)

Licenses issued
Basic

2
48

CMTS

38

UAS

241

Infrastructure Provider I

219

ISP (Internet)
National Long distance
International Long Distance
After putting the line on the Insurance sector, the other

371
29
24
service sector I would like to

discuss about is the Telecommunication Industry.

The media scenario in India has undergone a spectacular change since Independence.
From the days of bullock cart, we have traveled down the modern age of satellite
technology and cyberspace. The country has been witnessing a revolution in
communication technology. Ever since the beginning of planned development in the
country, the role of mass media in the development process has been recognized
significantly. With the launching of grass roots democratic structures, followed by
vigorous efforts to implement Right to Information, Rural Health Mission, Drinking
Water Mission, Rural Electrification, Rural Employment, Empowerment of Women,
and renewed enthusiasm to spread the light of Literacy, the mass media is now at an
advantageous position to meet the challenges of rural uplift in this 21st century. Rural
upliftment has always been remained a prime concern of all governments in India.
The Indian economy is pre-dominantly rural. More than 72 per cent of the Indian
popu lation reside in villages and rural areas. Rural women are a vital part of Indian
economy and one-third of national labourforce and a major contributor to the survival
of the family. Government is making continued efforts to provide equitable growth
opportunities to rural women by the ways of empowerment and upgrading the
information infrastructure in rural and remote areas. For many years now, the press,

49

particularly regional and local vernacular press, the All India Radio and the national
television Doordarshan have been putting out programmes for benefit of the rural
people. The recent boom in satellite television combined with governments
decentralization policy in telecommunication sector have been in the process of
transforming the rural information and communication infrastructure to a great extent.
In this paper, a detail study has been carried out how the telecom media has been
flourishing and contributing towards the rural development process in India.

Indian Telecom Revolution

The reforms undertaken in the telecommunication sector since 1991 has resulted in
unprecedented growth of the telecommunication in India. At the time of Indian
Independence (1947), the newly formed nation had 84,000 fixed telephone lines for
its population of 350 million. Thirty-three years later in 1980, the number of
telephones raised to 2.5 million and 12,00 public telephones for a population of 700
million, out of which only 3 per cent of Indias 6,07,491 villages had telephone
service where more than 75 per cent of the countrys population resides. Today, India
is having 100 million telephone network is one of the largest in the world while in
terms of number of phones, our country stands fifth largest network after China, USA,
Japan, and Germany. With a shift from Hexagonal Policy in 1980-91 to
Grampanchyat Public Telephone Service in 1991-94, the quantity of public telephones
in rural areas rose from 48,828 to over 2,06,000 in 1991 and in total by 1999 India
had an installed network of over 25 million telephone lines spread over 300 cities,
4,869 towns, and 3,10,897 villages. The real telecommunication revolution in rural
India occurred during 1988-98, the number of villages with some sort of telephone
facility increased from 27,316 to 3,00,000 villages (half of all Indias villages).
50

During the first year of the present UPA government from May 2004 onwards, an all
time growth has been achieved by adding 2.36 crore phones where as the number of
phones provided in the country up to 1995 was only about 2.2 crore. By 2000, it was
about 6,50,000 PCOs providing reliable telephone service all over India including
remote, rural, terrain, and tribal areas. Similarly, the position with regard to rural
Direct Exchange Lines (DELs) increased from 16.48 lakh in 1995 to 122.72 lakh as
on 31 March 2004 in rural areas. The government has sanctioned Rs 200 crore for
Universal 88 Indian Media Studies Journal Vol.1 No.1. July-Dec. 2006 Dr. J.S.
Giri Rao & S.N. Pattnaik Service Obligation (USO) fund to support the operation and
maintenance of more than 5.3 lakh village public telephones (VPTs) and rural DELs.
Presently, more than 87 per cent of the Indian villages have already been covered by
VPTs provided by BSNL. Besides, apart from these, BSNL has also provided all 133
lakh rural DELs in the country. The latest form of communication revolutionizing
both urban and rural (to some extent) India is mobile telephony. It was in 1995
introduced in India and just after 3 years, the user capacity was around one lakh
cellphone users in four metro cities and another 5,00,000 or so cellphone users existed
in other towns and cities, a number that is very quickly progressing. The year 2003-04
showed a record growth of 40 per cent in the total number of telephone connections
(fixed+WLL+CMPs). The total number of telephone connections as on 31 March
2004 were 765.4 lakh comprising 464.8 lakh fixed lines and cellular connections
provided by BSNL and MTNL and 300.6 lakh by private sector. The latest
information shows that the total number of phones as on end of September 2005 (both
mobile and land line) rose to 1128.8 lakh out of which 478.3 lakh were land line
phones while 650.5 lakh mobile phones. India has set itself a target of 2500 lakh
telephones by 2007, of which around 2000 lakh are expected to be on mobile network.

51

To meet the target, the country should be adding around 50 lakh telephones every
month.(all in lakhs) 2005-06 March 31 June 30 September 30 Addition Mobile 522.2
573.8 650.5 128.3 Landline 459.1 469.0 478.3 19.2 (all in lakhs) 2004-05 March 31
June 30 September 30 Addition Mobile 336.0 394.7 429.8 93.8
Landline 425.8 434.5 438.0 12.2 The tele-density which was 5.11 per cent as on 31
March 2003 has increased to 10.38 per cent by October 1, 2005. In recent past, it was
calculated that every moth more than 20 lakh phones get added (i.e., 70,000 persons
are provided phones everyday). In terms of rural telephony, according to the available
data as on 31 March 2004, of the total 6,07,491 Indian villages, 5,22,347 villages (86
per cent) have covered with village public telephones (VPTs). Similarly, it is noticed
that the participation of the private sector has given major boost in growth and
development of telecommunication system from 21 per cent to 39 per cent during the
Technology for Rural Development period 31 March 2003 to 31 March 2004 in both
urban and rural area.Out of additional 219.2 lakh telephones connected during the
period, 186.1 lakh were provided by the private sector. Besides, a continuous positive
shift has been observed in the use of mobile telephony in recent past and contribution
of private sector in this regard is highly remarkable. The share of mobile (cellular
mobile phones (CMP)+Wireless in Local Loop (WLLfixed) which has increased from
23.77 per cent as on March 31, 2003 tomore than 44 per cent (261.55 lakh CMPs and
75.45 lakh WLL) as on March 31, 2004. The users preference in favour of mobile
phones against fixed phones continued and as a result of mobile phones grew by about
160 per cent while the fixed phones grew by 3 per cent during the above said period.
Based on the resources availability of the Bharat Sanchar Nigam Limited (BSNL),
Indias largest government-owned telecom company, it plans to provide 367.67 lakh
new connections during Tenth Five Year Plan (2002-07). The following table gives the
52

broad details of expansion programme envisaged by the Company during the Tenth
Plan.
The future growth of telecommunication scenario in India seems to be quite bright. It
is estimated by 2007, the country will have 250 million telephone connections, out of
which 180-200 million telephones will be mobile phones. By the same period, the
tele-density in our country will rise to 22 per cent and around 50 per cent contribution
in this sector would be provided by public sector operators. It is also expected that by
2007 every village in India will be connected with telecom network, the mobile
phones would play a major role in this endeavor. Similarly, the growth of
telecommunication network would pave the way for internet revolution in our
country. It is estimated that internet connection will rise to 18 million by 2007 from
5.4 million in December 2004. If the telecom connections rise as per the estimation
and target, it is expected further 40 million internet connections by 2010. With the
increasing competition among service providers in telecom sector, it is expected that
the tariff rates will come down benefiting the consumers.
Telecom is one of the fastest growing sectors in India with a growth of 21% and
revenue of Rs 86,720 crore in the year 2006. The sector is expected to grow over
150% by 2012. With increase in competition between the major players like BSNL,
MTNL, Hutchison Essar, BPL, Idea, Bharti Tele services, Tata, etc, the requirement
for mobile analysts, software engineers, and hardware engineers for mobile handsets
has increased. However, holding an engineering degree is not enough to survive in the
Telecom Sector. There is constant need of updating of knowledge, skills, and
attitudes. With this rapid growth in Telecom Sector, the need for trained professionals

53

in bound to rise and so is the training need. The total training market in Telecom
Sector is estimated to be Rs 400 crore.
Many top players are spending a huge amount on training and development, for
example BSNL alone spends more than 100 crore on training and development of its
employees through the Advanced Level Telecommunications Training Centre
(ALTTC) and 43 other regional training institutes. Reliance has also established
Dhirubhai Ambani Institute of Information and Communication Technology. In
addition to that, Bharti has also tied-up with IIT Delhi for the Bharti School of
Telecommunication Technology and Management.
With the increase in competition, availability of huge amount of information through
internet, magazines, newspapers, TV, etc, and increased awareness among customers,
the demand to impart proper training in non-technological areas like customer care
and marketing has increased too.
Rapid

technological

changes,

network

security

threat,

mobile

application

development, growing IP deployment in the sector have brought back the training and
development in the priority catalog.

54

OBJECTIVES
The main objective of the study is to analyze the Development of the Service
Marketing Business in Indian Context.

Some other sub-objectives are:

1. To understand the development in Insurance sector and the telecommunication

sector in India.
2. To know the growth of Service marketing and special attention on Insurance
and the telecommunication sector in india.
3. To analyse the future growth pattern.

55

SCOPE OF THE STUDY

Service marketing has emerged as one of the major and fast growing sector of the
indian market. This report points out the issues which need to be addressed as far as
further development of the Service Marketing is concerned. This report provides a
roadmap of the service marketing process planning process on an organizationwide
basis as well as within the other marketing function.

This report defines Service Marketing and its benefits for organizations and outlines
the steps in performing effective planning. It provides practical tips for implementing
planning programs and closes with the discussion of the role of marketing
professionals in strategic planning, including how to approach planning within the
Marketing function itself.
This study also cover the nature, features and characteristics of the service and service
marketing which are very important to consider for the further development of the
Service Marketing in INDIA.

56

USE AND IMPORTANCE OF STUDY

This report will be useful in various ways such as:

In understanding the concept of the service marketing .

In understanding the latest trends in the Service Marketing.

In understanding the reasons for the development of the service marketing.

As far as importance is concerned this study will put light on the Service Marketing in India
and will provide the information regarding development of Insurance sector and
Telecommunication sector. The latest trends can also be recognised and on that basis one can
form a perception regarding the Service sector and its development in India.

57

RESEARCH METHODOLOGY

This report is purely based on secondary data and the data was particularly collested from
various journals, magazines, newspapers and various internet sources.
So as per the requirement of the research I used Descriptive research in the study.

RESEARCH DESIGN:
A research design is the arrangement of conditions for collection and analysis of a
data in a manner that aims to obtain complete and accurate information in the said
studies.
The process has to start from grass root level and it was very important to understand
the Service Marketing in Indian context.
The entire study was more of a Descriptive Research type and incorporated a formal
study of the specific problems.
The data collected had to be systematically arranged, analysed and reported in a form
congenial to take on the spot decisions

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Data collection and analyses

Service Sector in India today accounts for more than half of India's GDP. According to data for
the financial year 2009-20010, the share of services, industry, and agriculture in India's GDP is
55.1 per cent, 26.4 per cent, and 18.5 per cent respectively. The fact that the service sector now
accounts for more than half the GDP marks a watershed in the evolution of the Indian economy
and takes it closer to the fundamentals of a developed economy.
The boom in the services sector has been relatively "jobless". The rise in services share in GDP
has not accompanied by proportionate increase in the sector's share of national employment.
Some economists have also cautioned that service sector growth must be supported by
proportionate growth of the industrial sector, otherwise the service sector grown will not be
sustainable. In the current economic scenario it looks that the boom in the services sector is
here to stay as India is fast emerging as global services hub.

59

DATA COLLECTION AND ANALYSES OF LIC

60

61

62

DATA ANALYSES Of TELECOMMUNICATION

63

64

65

66

FINDINGS
Service Sector in India today accounts for more than 55% in Indian GDP.

LIFE INSURANCE SECTOR

1. LICs Contribution to five years plan increased from 184crores in 1956-61 to
218510 crores in XIth five year plan.
2. LICs has increased around 15% offices during the last decade.
3. For the development of Insurance sector all player are focus about resolving
the grievances. ICICI prudential has resolve around 90% grievances.
4. Customers have tremendous choice from a large variety of products from pure
term insurance to unit-linked investment products because there is many
player are available in Indian Market.

TELECOM SECTOR
1. Telecom is one of the fastest growing sectors in India with a growth of total revenue of
US$ 3032.96 million in the year 2003 to US$17594.50million in the year 2007 and
US$35782.92million is projected for the year 2013.
2. Airtel has highest market share that is around 24%
3. The Indian Telecommunications network with 621 million connections (as on March
2010) is the third largest in the world.

67

CONCLUSION
Service Sector in India today accounts for more than half of India's GDP. According to data for
the financial year 2009-20010, the share of services, industry, and agriculture in India's GDP is
55.1 per cent, 26.4 per cent, and 18.5 per cent respectively. The fact that the service sector now
accounts for more than half the GDP marks a watershed in the evolution of the Indian economy
and takes it closer to the fundamentals of a developed economy.
The boom in the services sector has been relatively "jobless". The rise in services share in GDP
has not accompanied by proportionate increase in the sector's share of national employment.
Some economists have also cautioned that service sector growth must be supported by
proportionate growth of the industrial sector, otherwise the service sector grown will not be
sustainable. In the current economic scenario it looks that the boom in the services sector is
here to stay as India is fast emerging as global services hub.
This report defines Service Marketing and its benefits for organizations and outlines
the steps in performing effective planning. It provides practical tips for implementing
planning programs and closes with the discussion of the role of Marketing
professionals in strategic planning, including how to approach planning within the
Marketing function itself.

68

RECOMMENDATIONS
Recommendations To Insurance Sector
1. First off all company should focused on reliability

creation by good corporate

governance, transparency in the function, quality of the services.

2. They should care about the right to information, education.
3. Insurance sector requires special attention as it seems to one of the unaddressed sectors.
4. First of Motive of Marketing concept of LIC may be awareness with selling product
intent.

Recommendations To Telecommunication Sector

1. With this rapid growth in Telecom Sector, the need for trained professionals in bound to
rise and so is the training need.
2. Regulatory framework is required for the further development.
3. Advancement in technology is required as far as Telecommunication sector is
concerned.
4. Better strategies are required to groom the service sector in India.
5. Implementation of policies and procedures is another way to groom service sector in
India.

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LIMITATIONS
1. Lack of authentic data because secondary data was used.
2. Service industry is considered as a tough nut to crack so more people were dissatisfied
which enabled me to collect primary data.
3. Lack of time to conduct this particular report was the other major limitation.
4. The researcher have limited

knowledge about the Service sector which is also a

limitation of this research report

70

BIBLIOGRAPHY

There are certain websites are as follows..

www.rbi.org.in

www.irdaindia.org

www.irdaonline.org

www.licindia.in

www.goggle.com

www.encycopedia.com

Books and Journals

M.Y. khan (Financial institution and services)

Economic survey 2010

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