Budget 2026: What FM Sitharaman can do to amplify India’s telecom leap

By Naveen Aggarwal

India’s digital transformation in the recent years has been unprecedented, making consumer experience effortless - payments through UPI in seconds, remote diagnosis delivered over telemedicine, real time response to cloud driven commands, etc. At the back are the telecom networks that today carry not just data, but India’s economic momentum. Every layer of digital public infrastructure, from UPI, ONDC to smart logistics and digital healthcare, resilient and scalable telecom networks are at play.

Government of India, in recent years, has stepped on the peddle through reforms such as the Telecommunications Act, 2023, the Production Linked Incentive (PLI) scheme, and the Draft National Telecom Policy, 2025. Together, they envisage near universal 4G and 5G coverage by 2030 and a doubling of the sector’s contribution to GDP.




With the momentum gaining ground, Budget 2026 comes at an important juncture to add more firepower - through alignment of fiscal policy with technological ambition and national interest. Four areas, in my view that will hold the key.

Supercharging innovation

India has taken considerable steps towards positioning itself as a global leader in 6G related innovation, Hon’ble Prime Minister of India’s 6G initiative being a step in that direction. While the sheer proliferation of 5G, covering 99.9% of districts and all States/Union Territories showcases our ability to deploy cutting edge technology at scale, the potential next step has to be to fuel R&D which would go a long way in realizing the ambition. We have the talent and capability, offering incentives can drive innovation at scale, putting India at the top table of global R&D hubs.

An obvious way to do this would be to expand the scope of PLI scheme and bring a larger portfolio of Telecom equipment within its scope. This would strengthen domestic manufacturing and transition India, from assembling hardware to designing technologies, leveling up in global networks and subsequently the value chain.

Relieving financial stress

Telecom by nature is a capital-intensive business and operators needing to pay 5% Universal Service Obligation (‘USO’) Fund contribution and 3% License Fee, pressurizing cash flows when it could be put towards network expansion, modernization, and densification. Suspending contributions until the existing corpus of INR 86,000 crore is utilized, could be a balanced approach, acknowledging USO’s critical role in bridging rural divide, and at the same time providing leeway for operators.

Another relief which would be welcome is the extending the carry-forward of business losses from 8 years to 16 years, considering long gestation of telecom projects.

Ending tax litigation fatigue

Tax Litigations are a chronic pain point for the telecom sector. While multiple amnesty schemes have been launched to enable taxpayers to bring closure to some of these disputes, its time a holistic effort to end archetypal industry specific litigation is brought about. Case in point being the ongoing debates around the characterization of telecom services which exemplify how ambiguity can persist despite years of adjudication.

Targeted legislative and tax clarifications can bring consistency and closure to long-standing issues, driving certainty and restoring investor confidence. In my view, for a capital-intensive sector like telecom, predictability matters as much as incentives, and Budget 2026 can break this cycle.

Address Indirect Tax concerns

Lastly, we need to look at resolving the long-standing issue of rising GST credit accumulation in the Telecom sector. A streamlined approach of going about this may be rationalizing the GST rate from the current 18% to 5% under the Reverse Charge Mechanism (RCM) on critical payments such as Spectrum Usage Charges and License Fees. This change would deliver two outcomes with a single effort, being revenue-neutral for the Government while significantly improving liquidity for Telecom companies. This is especially critical in a sector where sustained investment underpins digital inclusion and economic growth.

India’s telecom story has been one of ambition, and today, the sector is the very foundation where Digital India stands, and Viksit Bharat rises. We have strong fundamentals in place, and Budget 2026 can bring together policy vision with fiscal pragmatism, to move from incremental gains to exponential progress. Here’s hoping it converts ambition into momentum, positioning India as a global leader in next-generation connectivity.

(Naveen Aggarwal is Office Managing Partner – Delhi NCR, KPMG in India)