Mobile penetration boosts economic growth

Mobile penetration facilitates economic growth, according to a study released by boffins on the Indian Council for Research on International Economic Relations (ICRIER) on Monday.

When investigating the socio-economic impact of mobile technology, the researchers found that Indian states with 10 per cent higher than average mobile phone penetration enjoy an annual average growth rate 1.2 per cent higher than those with a lower teledensity.

The research was funded by Vodafone, which claims that the findings demonstrate that mobile phones aid the process by which disadvantaged groups, including the low-skilled labour force, enjoy the fruits of economic growth.

Research leader Rajat Kathuria, of the ICRIER, said: “We believe this analysis shows that telecommunications is a critical building block for the country’s economic development. Our work also shows that the real benefits of telecommunications only start when a region passes a threshold penetration rate of about 25 per cent. Many areas have still not attained that level, which indicates the importance of increasing teledensity as soon as possible. If Bihar’s mobile penetration rates were similar to those of Punjab, for example, then it would enjoy a growth rate that is 4 per cent higher than its current rate.”

But while such information as weather reports and market prices, accessed by mobile phone, have begun to have an impact on productivity for the agricultural sector, the research concludes that other infrastructure challenges, such as poor roads and lack of refrigerated transport, need to be addressed in parallel in order for farmers to realise the full potential of access to information via mobile.

Rajiv Kumar, director and chief executive of ICRIER, argues that the government needs to refresh the policy environment for telecommunications, in order to attract investment to the sector and to ensure this investment is used to maximum effect. In particular, he recommends that more spectrum should be made available for civilian use and policy makers should consider changing the current caps on foreign investment and the criteria for mergers and acquisitions.

“India has a lower teledensity than many other emerging economies including China, Pakistan and Sri Lanka. We also lag far behind in terms of internet access,” said Kumar. “It is therefore particularly important that in these challenging times we step up to the mark and create the appropriate regulatory environment to attract investment and sustain a world class telecommunications service. Our global competitiveness depends on this.”

Vodafone itself paid out $11.7bn for a 67 per cent stake in Indian operator Hutchison-Essar in 2007.

The research also highlighted that while mobile connections in India were growing at rates exceeding 10 million per month in 2008, there is considerable penetration variation within India’s borders. Delhi’s penetration rate is in excess of 100 per cent but states such as Bihar, Orissa, Assam and Madhya Pradesh have not yet reached the critical 25 per cent threshold. In addition, access to the internet is only around 5 per cent nationally and in some states, such as Bihar, this figure falls to 0.1 per cent.