Teledensity and economic growth

When he was still running the Telecom Commission, N Vittal once quoted ITU statistics that correlated teledensity with economic growth. Empirically, for every one percent increase in teledensity, there is a three percent increase in GDP. India’s case seems to have further validated this.

Even as India formally achieved a teledensity of 7% at the end of December 2003, 15 months ahead of its target of National Telecom Policy 99, Reliance Infocomm, the latest entrant into mobile telephony has emerged as the largest wireless service provider in the country. According to a media release issued by Telecom Regulatory Authority of India on Tuesday, the total number of phones (including fixed and wireless) in the country touched 70.5 million as more than 20 million new telephone subscribers were added in the calender 2003. [The Financial Express]

Mobile penetration is growing roughly at the rate of 1 million subscribers a month; China was doing this number in 1998. In 2002/3 China added more than 5 million subcribers a month ! India has the potential to take the same route, now that the licensing regime has stabilised after the umpteen fiascos of the last decade.

But PC sales were expected to be only 30 million units – which puts a limitation on Internet penetration. In the past few years Bharti, Reliance, Tata and BSNL have all laid out new fibre-optic backbones or substantially improved existing ones. International bandwidth is also no more a scarce resource. So on the telecom front, there does not seem to be a serious lack of quality infrastructure. The government must lift customs duties on computer hardware to rapidly build demand and usage of the backbone. If not, not only will much of the private investment in telecom infrastructure not yield the expected returns, but a vast majority of India will remain a spectator to the economic growth that is now beginning to happen in India.

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