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A new growth driver

A new growth driver
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First Published: Thu, Aug 23 2007. 01 27 AM IST
Updated: Thu, Aug 23 2007. 01 27 AM IST
During the late 1990s, an oft-repeated story about India’s mobile revolution featured fishermen in Kerala who used their mobile phones to call wholesale agents before reaching the shore to check market prices. Considering that mobile calls used to cost 20 cents a minute in those days and were obviously limited to the affluent, the story appeared apocryphal to some.
There is now a research that has mapped the benefits to those fishermen. The study, by Robert Jensen, a Harvard University economist, found that as mobile coverage increased in Kerala, fishermen’s incomes increased by 8%, fish prices fell by 4% on average and less wastage was created. It concluded that information makes markets work, and markets improve welfare.
It is this welfare function that the mobile phone revolution seems to be spreading across India, especially in rural areas. Mobile phones are making conventional economic transactions more cost- and time-efficient. They often make up for poor infrastructure by substituting for travel. They allow price data to be distributed and enable traders to engage with wider markets.
Mobile connections have opened up new avenues of growth for India’s unemployed youth, who have found productive engagement as retailers on the move. Close to 800,000 retailers across India sell mobile-related products. Companies such as mine have also created a unique sales force that traverse the length of India on bicycles, motorcycles, tractors, buses and even on foot.
As India adds more than seven million subscribers every month, there is a distinct impact on the grass-roots economic landscape. Mobiles have played the role of a growth multiplier. From the roadside motor mechanic to the mason, the vegetable vendor or the illiterate housemaid, everyone is getting linked to his or her relevant marketplace. The farmer in the countryside can now base his harvesting decision on the regional commodity market rates he receives via text message, or plan his sowing in line with the weather forecast.
Mobile phones are also increasingly useful tools for helping to overcome illiteracy. A study conducted in Europe in 2005 found mobile phones to be effective for tempting young unemployed adults back to learning. In India, where more than 35% of the population (over 350 million) are illiterate, I’ve witnessed illiterate villagers who have achieved functional literacy of names and numbers via their mobile phones.
Mobile banking and money transfer is another area in which mobile phones will have a far-reaching effect in transforming India. New products and services where mobile phones are used to effect payments will soon reduce customer visits to banks and ATMs. A pilot project between State Bank of India and Airtel in the largely unbanked villages in the Indian states of Andhra Pradesh and Uttaranchal is taking off. Mobile phones also will soon be playing a key role in the execution of rural poverty alleviation projects. A number of microfinance projects run by CARE India, a non-governmental organization working on poverty alleviation, are already being run via mobile phones.
According to a study by Leonard Waverman of the London Business School, every additional 10 percentage point penetration of mobile phones in a developing country adds an extra 0.44 percentage points of GDP growth. The figure might not appear big, but the cumulative impact will be substantial in the long run.
The digital divide finally appears to be giving way to digital integration. Mobile phones have turned out to be the most powerful device to bridge the divide.
Edited excerpts fromThe Wall Street Journal. Manoj Kohli is president and chief executive officer of Bharti Airtel. Comment at otherviews@livemint.com
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First Published: Thu, Aug 23 2007. 01 27 AM IST