Home/ Companies / High-teledensity states grew faster, says study

New Delhi: Nearly 14 years after mobile telephony started in India, new research says increased penetration of cellular technology has contributed to higher and more inclusive economic growth.

A report, titled India: The Impact of Mobile Phones published by the Indian Council for Research on International Economic Relations, or Icrier, a New Delhi-based think tank, says states with 10% higher mobile phone penetration than others have grown 1.2% faster.

The report was funded by Vodafone Group Plc., the world’s biggest mobile phone services firm that controls two-thirds of Vodafone Essar Ltd, India’s third largest cellular phone firm by customers.

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The benefits, which only begin to accrue once penetration rates cross 25%, reveal that differences in growth rates could be stark.

For instance, Bihar could grow 4% faster if it had the same number of mobiles as a percentage of population as Punjab, according to Rajat Kathuria, a professor at Icrier. Kathuria co-authored two of the four papers in the report.

Driven by lower tariffs and falling handset prices, mobile phones in India have been sold at a brisk pace in the past few years and have been clocking up to 10 million users each month in recent months.

The country follows China and is ahead of the US by customers, and at the top by fastest growing telecom markets measured in terms of number of monthly additions.

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Still, the report points out that India’s mobile penetration rates are the lowest among countries that include China, Sri Lanka, Pakistan, Brazil and the Philippines, which are similarly placed in terms of economic development.

Radio spectrum policy, licence fees and the universal service obligation—an industry reference to initiatives aimed at expanding the phone network to rural areas where customers may not be able to afford phone services—are cited as areas in need of reform.

Mobile phones use spectrum or airwaves to connect with one another. The method India has used in the past to allocate rights to use spectrum, which is a finite resource, has been criticized since it was linked to subscriber numbers and not the economic value of radio waves that could have been discovered only through a public auction.

In the past, studies have shown how mobile phones have resulted in increased productivity for farmers and other rural folk across India.

The Icrier study confirms this, but also goes on to look at how poor urban areas have gained as a result of using cellphones. In all 1,774 households were interviewed in 84 slums in Ahmedabad, Delhi and Kolkata.

While some findings are intuitive (mobile user households do better economically, for instance), others explain the contrast in clear terms. Income at households that owned a mobile phone for two years was at Rs7,289 per month, at least one-quarter more than for houses that owned a phone for one year.

The barrier to entry into the cellular world still remained steep. Those surveyed said they spent nearly 40% of their income to get connected to the mobile network—an average of Rs2,385 on the handset and Rs285 per month on talk time.

But, once connected, two in three users answered that their travel expenses had decreased, 52% said it took them less time to do their work and 51% reported a reduction in the time taken to buy materials and provide a service.

Other skews in societal usage patterns remained, the report noted. “Mobiles are much more likely to be used by males than by females within households," wrote Ankur Sarin and Rekha Jain, professors at the Indian Institute of Management, Ahmedabad. This reinforces “disparities that characterize many other resource allocation decisions both within and outside households".

Graphics by Sandeep Bhatnagar / Mint

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Updated: 19 Jan 2009, 10:43 PM IST
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