Home / News / India /  Does electrification drive development?

In India and other developing countries, access to electricity is considered a critical step towards development. But according to a new study, electrification alone does not boost economic outcomes, and its effects can vary even within regions.

In the study, Kenneth Lee and others highlight that identifying the economic gains from electricity is tricky because there are other factors, such as income and education, which affect both access to electricity and economic outcomes. They also show that existing research has found that electricity can have mixed effects on important economic outcomes. For instance, in a few countries, access to electricity has had positive large effects on female labour supply and increased educational attainment among children while in other countries electricity has had little effect on these outcomes.

To isolate the gains from electrification, the authors conduct an experiment in rural Kenya. In the experiment, rural households were offered connections to the grid at varying subsidized prices. Even in the same areas, there are significant differences in how electricity affects economic outcomes. They find that households willing to pay for a pricier connection noted economic gains much larger than those that wanted the connection for free. One reason for this could be that these households are also able to invest in appliances or business opportunities that make use of the new electricity connection.

Taken together, the findings suggest that access to electricity alone cannot drive development. Instead, the authors suggest electrification programs should be combined with other programs that allow people to use electricity effectively (through the use of electrical appliances for instance).

Also read: Does Household Electrification Supercharge Economic Development?

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