Teledensity determines states' growth rates: Icrier

Indian states with higher mobile phone penetration are likely to witness a higher rate of growth, according to a report by the Indian Council for Research on International Economic Relations (Icrier) and Vodafone.

According to the report, released today, 10 per cent higher mobile penetration leads to 1.2 per cent higher annual growth rate.

For example, if the mobile penetration rate of Bihar was the same as that of Punjab, its annual growth rate would be 4 per cent more than the current rate. Rajat Kathuria, research analyst, Icrier, says: “Our work shows that the real benefits of telecommunications start when a region passes the threshold penetration rate of about 25 per cent. Many areas have still not attained that level, which indicates the importance of increasing teledensity.”

The report concludes that an increase in teledensity in India’s lagging states will deliver significant economic returns on investment. Prosperous states like Delhi have a penetration of more than 100 per cent, while states like Bihar, Orissa, Assam and Madhya Pradesh have not even reached the 25 per cent level.

Agricultural workers and fishermen, both of whom account for 60 per cent of the total workforce and contribute almost 20 per cent to the country’s GDP, also benefit. It not only provides them with a time-saving and a convenient tool for information but also gives them customised content and increases their ability to coordinate with others at ease, says the report.

The research outlines the benefits for small businessmen and those living in urban slums. It found that mobile phone-users were able to cut down on their travel costs drastically and reduce the time taken to do a piece of work by 52 per cent. Mobile phones also reduced wastage of stock by 69 per cent.

They were also able to halve the time taken to procure material and reduce by 44 per cent the cost of procurement or providing a service. This increase in productivity led to 58 per cent increase in wages or price for products and services, the study found.

Use of mobile phones also enabled small and medium enterprises expand. The survey shows that small traders are able to provide more value to consumers with options of home delivery. Mobile phones also help save cost and time, which leads to higher profit, says the report. It also helps improve quality through better monitoring and staff retention, it says.

“The research demonstrates that access to telecommunications acts as a catalyst to realise productivity and efficiency improvements, thereby making it possible for the benefits of economic growth to be shared among a greater proportion of the population,” says Neil Gough, Director of Public Policy (emerging markets) at the Vodafone group.