Detailing the buoyance in the services sector, the pre-Budget Economic Survey on Tuesday said the "impressive progress in information technology and enabled services and fast addition stock of telephone connections particularly mobiles played a key role in the growth".

Current telecom connections stand at 196 million and are expected to be 200 million by the end of this month. By 2012, the country is expected to have a total of 650 million telephone connections, including 66 million wired and 584 million wireless connections, it said.

The Survey sought the provision of 200 million rural telephony connections to significantly boost rural teledensity to 25 per cent from the current level of 1.7 per cent.

It also called for broadband connectivity to be available on demand without speed limit, with connections being provided to health centres, schools and panchayats.

It envisaged the number of broadband and Internet subscribers would reach 20 million and 40 million respectively by 2010. The number of Internet subscribers grew at 25 per cent while broadband users grew only to 1.32 million in 2005-06 from 0.18 million.

With India becoming the fastest growing telecom market globally and tariffs dipping to the lowest, tele-density increased to 16.8 per cent in December.

With five million subscribers added monthly, the total number of telephones increased to 142.09 million as on December 2006, it said.

India is also expected to emerge as a manufacturing hub for telecom equipment due to rising demand for a wide range of such equipment.

"The production of telecom equipment has increased to Rs 17,833 crore (Rs 178.33 billion) in 2005-06 from Rs 16,090 crore (Rs 160.90 billion) in 2004-05 and a proposal for setting up Telecom Equipment and Services Export Promotion Council is in the pipeline," the Survey said.

The IT sector too has shown remarkable growth. Software and ITeS exports were estimated at $23.4 billion in 2005-06, up from $17.7 billion in 2004-05, a growth of 32 per cent.

The industry's contribution to GDP rose to an estimated 4.8 per cent in 2005-06 from a meagre 1.2 per cent six years ago. There has been no spectacular achievement in the hardware segment but there has been steady progress in production and exports of hardware, with total electronic hardware touching Rs 8,500 crore (Rs 85 billion) in 2005-06.

The IT and ITes sector employed about 13 lakh people in 2005-06 and created an additional 30 lakh job opportunities through indirect and induced employments.

The Survey asked the government to optimise the use of the Universal Service Obligation fund to roll out mobile and broadband services in rural and remote areas.

Being sceptical about the Department of Post, the Survey said it is expected to incur a higher deficit of Rs 1,379 crore (Rs 13.79 billion) in 2006-07, up from Rs 1,375 crore (Rs 13.75 billion) in 2003-04.

"Redefining the rationale of the subsidy constitutes an important policy question," it said, adding that there is a significant subsidy element in postal services with user charges roughly covering only 78 per cent of the cash costs. A National Data Centre will be set up in Delhi to connect all computerised post offices by March this year.

Economic Survey 2006-07: Complete Coverage