Cellular Phones and Economic Growth
Posted : July 27, 2005 at 5:40 am [IST]
All these years many older generation persons and me too thought of mobile phones as fad and status symbol and to a great extent a drain on hard earned money. But looking at it a little more seriously, and the impact of the increasing number of mobile phones on day-to-day life of all working population change the opinion.
The mobile phones are basically bridging the digital divide between rich and poor in India, at least for communication. And when mobile phones are clocking unprecedented 62% growth in sales in 2005 compared to 16% growth globally, it tells a different story about India’s growing economic strength too.
A recent study of London Business School found that in a typical developing country, a rise of ten mobile phones per 100 people boosts GDP growth by 0.6-percentage point. Mobile phones are the classic example of technology that will transform the quality of life of the people concerned, even in rural areas.
A mobile phone can boost entrepreneurship and economic activity, provide an alternative to bad roads and unreliable postal services, widen farmers’ access to markets, and allow swift and secure transfer of money. It will usher in a significant step forward for realizing the concept of PURA.
India has about 105 million phone connections in a nation of more than 1 billion people. Of this, mobile subscribers total about 58 million and account for most of the new connections. India is planning to add 150 million more connections in three years, and by 2010 it will have 500 million connections. However, India’s rural telephone penetration level of 1.7 percent is way below the 28 percent reached in urban areas. We are go miles still.
Cost of mobile sets is the primary obstacles to further penetration of the mobiles in rural areas. In a country where the numbers of people earning below $1 a day are 260 million, the mobile phones are still not so easily affordable. Even a $50 hand set would amount to 14% of the annual income of the people. How can they afford it? (In rich world, phones typically cost around $200 that is less than 1% of their average income per person.)
But the concept of providing products for those at the bottom of pyramids, propounded by C.K.Prahalad is bringing the change. Motorola- the world’s second largest handset maker has agreed to supply up to 6 million handsets for less than $40 each. And in June this year, Philips, the Dutch electronic firm, announced a new range of chips design to take handsets costs down to below $20 mark. Indian government is helping too by cutting down the tariff of import duty to 5%, and perhaps very soon it is going to scrap it altogether.
Besides being cheap, the mobile phones for rural applications are to be more reliable and robust too. It also must have a larger battery capacity, as in many a places people will not have reliable access to electricity. Motorola’s handset will have a standby time of two weeks.
Is not the communication scenario changing fast in India too? But we are still very slow. We shall have to provide skill training to lot of people to bring them in demand, when the mobile phone will improve their marketability. We shall have to manage this transformation too to eliminate some abrasions that the technology may cause.
- Indra
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