INDIA BUSINESS WORLD – FEBRUARY 2007
The Month that was ...

MOBILES CAN ADD VALUE TO GDP

MOBILE phones are not just about getting connected, they can prove to be a great money spinner for the country's economic health by the virtue of productivity gains achieved by its users, especially in a developing market like India.

According to a new study of three developing markets China, India and Philippines conducted by global consultancy giant McKinsey, the economic impact of all wireless activities on the economy of these countries is up to four times of the combined value of mobile operators.

The overall wireless activities in India contributed about 2% to the country's GDP in 2005, the study says, adding that this could rise considerably going ahead as the mobile penetration was a mere 7% in the year. Even a 2% contribution to the GDP amounts to a whopping $14 billion, taking into account a GDP of $700 billion in 2005.

In markets like China and Philippines, where wireless penetration is higher, the wireless activities contributed 5% and 7.5%, respectively, in 2005. Wireless penetration in China stood at 28% in China and 41% in the Philippines in 2005.

Much of the value created by wireless activities appears to come from the productivity gains and economic surplus that wireless customers receive simply by using their mobile phones, the study shows. According to the report, these results should encourage regulators and operators to get mobile phones into more hands more quickly.

By promoting the use of mobile phones, regulatory and industry players can amplify such gains, as well as the contributions that wireless industries make to GDP. India has 2% contribution while having the lowest penetration. A 10% increase in penetration would add $2.3 billion to the end-user surplus and a further $6.2 billion in operator revenues in the country, he added.

India, the world's largest growing telecom market, is expected to grow to 500 million mobile users by 2010 and 250 million by 2007 from 150 million at present. Mobile phones come with a price tag of less than Rs 2,000 and both affordable STD and ISD call charges, the number of users would increase as as the decreasing average age of cell-phone users are likely to translate to additional subscribers.