Amidst the spreading gloom of the economic downturn following the global financial meltdown, the Indian telecom

sector provides the proverbial silver lining. The growth in mobile connections has continued at around 10 million a month and investment prospects remain bullish. It is important at this stage to ensure that investor confidence is maintained by further improving the regulatory environment and ensuring that the policy regime promotes growth. During the past few years this research has built a detailed understanding of the importance of telecommunications infrastructure to economic development. India has more diversity within its borders than any other country it comprises 1.1 billion people, living and working in very different circumstances and geographies. Yet it has a national government and policy environment that sets critical economic policies (including telecommunications) across the whole country. We have taken advantage of that diversity and the availability of state level data to investigate economic impacts within India across states, economic sectors and population segments. Furthermore, because even state level data can mask great differences, we have looked at specific economic sectors (agriculture and small and medium enterprises) and segments of the population (urban slum dwellers) to extend our understanding. 2. The impact of telecommunications on economic growth A number of earlier studies have examined the relationship between telecommunication services and economic growth. There is a positive relationship between GDP per capita and telephone density indicators. The data for all countries, from the least developed to the most industrialised, generally fall within a small band along a straight line. A similar representation for mobile teledensity and per capita GSDP across Indian states (Figure 1) also reveals data tightly clustered around the line of best fit. Figure 1: Mobile density and Per Capita Income across Indian states

10 20 30 40 50 60 70 80 100 90 0 10000 20000 30000 40000 50000 60000 70000 80000 Per Capita GSDP Mobile penetration Source: TRAI, CSO; data for March 2008. Mobile density is subscriptions per 100 population Noting the high correlation between telecoms penetration and growth, early research focussed on the potential role that telecommunications could play in accelerating growth and economic development. The growth dividend of investment in (fixed) telecommunications infrastructure in developed economies is now fairly well established. Since the growth of mobile phones in developing economies such as India, China, Brazil and others has been sensational; it raises the obvious question whether mobile phones in developing economies are playing the same role that fixed telephony played in the richer economies in the 1970s and 1980s. Mobile phones are often the only means of communication for a large number of people. For example, the most recent numbers available for India reveal that while fixed line penetration is roughly 3.5 per hundred and declining, the corresponding number for mobile stands at 28 per hundred, and growing. Because mobiles substitute for fixed lines in developing economies, their growth impact should be stronger in these than in developed economies, where mobiles complement the extensive fixed service.The value of a mobile phone can be particularly high because other forms of communication such as postal systems, roads and fixed line networks are often poor in developing countries. At the same time, in many developing countries growth has been low due to a host of other reasons poor governance, lack of capital, low skill levels and many others. It is unlikely that increased mobile penetration by itself will be able to alleviate these other constraints on growth. This caution is supported by case studies.The economic impact of mobile is likely to be strongest when

the absence or inadequacy of existing telecommunications facilities acts as a barrier or bottleneck to private economic activities, but also when enough other infrastructure exists to permit the effective use of telecommunications. Particularly striking is the paltry broadband penetration rate despite a low threshold speed for the figures: any download speed above 256 kilobits per second (kbps) in India is classified as broadband, a level of service that would be seen as inadequate in most countries.11 The number of subscriptions to broadband is woefully short of the target set by DoT (See Table 2).12 The number of internet subscribers too would be significantly below the policy target, were it not for the rapid penetration of mobile internet. There are about 32 million mobile subscribers accessing the internet through wireless networks today, compared to about 11 million who access it through the fixed network. India seriously lags behind on broadband. Even TRAI has conceded that its future targets are unlikely to be achieved, unless critical issues inhibiting broadband expansion in urban as well as rural areas are addressed. These include both policy and regulatory constraints.13

Two notable implications follow from these developments. One, hitherto unserved or under-served people will for the most part gain access through wireless technologies, whether the services are described as fixed, mobile, voice, or data. And secondly, given the importance of wireless to modern ICT infrastructures, it thus becomes crucial for the government to play a more effective role in managing scarce frequencies for optimal use. This is a point to which we return in the concluding section. The triggers for the massive increase in mobile penetration have been many. Factors such as price, income and tastes

have all been important determinants (this is explored more formally in the economic model set out below). There has been an enormous decline in prices. The effective price per minute for an outgoing mobile call has dropped from Rs. 15.30 in 1998 to Rs. 0.68 today. This 98% decline would be much higher in real terms. Another measure, the Average Revenue per User (ARPU), is around Rs. 250 per month, compared to about Rs. 1550 in 1998.14 At the current exchange rate that is roughly US$5 per month, representing about 5% of an average Indians monthly income. The launch of micro prepaid and handsets priced at less than Rs.1,000 (US$20) have further reduced entry cost to the subscriber and extended demand. In addition, consumer financing of handsets, facilitated by declining interest rates, allows spreading the cost over manageable monthly instalments. Micro prepaid allows recharge options for as low as Rs. 10 (US$0.20). Other features of pre-paid reducing subscribers entry costs include lifetime validity, full value recharge and special on-net or within network tariffs.15 Not surprisingly therefore, 95% of new subscriptions are pre-paid, lifting the total number of subscribers on pre-paid from 76% in 2007 to about 85% at the end of 2008. Income (measured by GDP per capita) has doubled since 1998, also contributing to demand. India was not unique in its earlier embrace of a telephone monopoly but deregulation started relatively late, in 1994, with drafting of the National Telecom Policy (NTP 94). This saw the abandonment of the government-owned, vertically integrated structure of service provision which had led to low supply, high prices for certain services and a large segment of the population without access to services. Market entry by mobile operators was allowed, starting in 1995, but was at first limited to two operators per service area.16 The third mobile licence was reserved for public sector operators, MTNL and BSNL and the fourth mobile licence was auctioned in 2001. Subsequently in 2003 unlimited competition was introduced through a Universal Access Service Licence (UASL) that recognised the convergence of fixed and mobile technologies in providing access.17 It was at this point that the number of mobile connections took off. The introduction of the Calling Party Pays (CPP) regime also contributed. Of total telecom sector revenue of US $27.5 billion in March 2008, mobile telephony accounted for more than 50%. Average growth in revenue during the past three years has been 20%, making India the fastest growing telecoms market in the world. The more than 10 million mobile phones being

added each month are distributed among the major operators. Airtel, Vodafone and Reliance added the highest numbers of subscribers, with 2.03, 1.57 & 1.51 million new additions respectively in March 2008. Wireless service providers in India along with their respective market shares for March 2008 are shown in Table 3. The top six players in the mobile market have an all-India presence, while the others are regional.18 The top three firms are private sector, while the public sector BSNL ranks fourth. Strong competition has ensured a largerand more reliable network and far higher penetration than the public sector would have been able to do on its own. Table 3: Mobile market shares Service provider Market share, March 2008 Bharti Airtel 24.34% Reliance 17.74% Vodafone 17.21% BSNL 14.37% IDEA 9.54% Tata Teleservices 9.23% Aircel 4.21% Spice 1.42% MTNL 1.29% BPL 0.49% HFCL Infotel 0.12% Shyam Telelink 0.04% Source: COAI. Figures are all-India shares, March 2008 The Indian experience shows that, although it took several years for deregulatory measures to have an impact, in the end competition-driven network expansion resulted in services being provided to those who had been denied access in the public monopoly model. However, even after the monopoly of the government-owned incumbent is broken and the growth trajectory increased, more is required if India wishes to close the gap with other comparable countries, as Figure 4 illustrates.

On the other hand, mobile airtime rates in India have dropped to a level unmatched anywhere else in the world (see figure 5). At roughly 1 US cent a minute, the price is half of that prevailing in China and Pakistan. It is, therefore difficult to isolate a single factor responsible for Indias low relative teledensity. One possibility is that it is due to Indias late start. By the time India launched mobile in 1995, China had 3.6

million subscribers and Brazil 1.26 million. But this cannot be the only reason as the gap continued to expand until very recently. Figure 5: Airtime rate per minute in selected countries 0 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 Brazil 0.17 South Africa Philippines China Pakistan India 0.14 0.13 0.02 0.02 0.01 Source: Merrill Lynch 2Q08 Although net monthly additions in India are the highest in the world today, the challenge is to ensure that growth does not slow, so that the gap between India and other countries is bridged sooner rather than later. This is all the more important given the results of our econometric work reported below, which show a positive and significant relationship between mobile density and income at the state level. Mobile access differs between states and between urban and rural areas, but the gap is less than for other technologies It is often claimed that competition between the states to attract investment, especially since the 1991 economic reforms, has widened the already huge disparities between them. The richer, better-administered and more literate states have proved more attractive than the poorer ones to investors. Between 1999 and 2008, when the Indian economy grew at Table 5: Indicators for individual states States Geographical Literacy Rate, Per Capita Mobile Fixed Internet Broadband Area 2001 Income, 2008 Subscribers Subscribers Subscribers Subscribers Sep-08 Sep-08 Dec-07 Jan-08 Sq. km. % Rs. Per 100 people Per 100 people Per 100 people Per 100 people Delhi 1,483 81.67 67,661 111.60 14.56 8.23 2.5 Punjab 50,362 69.65 44,350 45.27 6.05 1.39 0.4 Tamil Nadu 130,058 73.45 36,344 45.10 5.55 1.58 0.72 Kerala 38,863 90.86 39,370 41.44 10.77 1.99 0.45

Himachal Pradesh 55,673 76.48 42,785 39.29 5.78 0.54 0.12 Maharashtra 307,713 76.88 43,681 37.46 5.56 0.35 0.08 Gujarat 196,024 69.14 41,826 35.31 3.82 0.97 0.36 Karnataka 191,791 66.64 31,001 34.12 4.87 1.3 0.62 Haryana 44,212 67.91 49,193 31.90 3.75 0.78 0.19 Andhra Pradesh 275,045 60.47 32,239 30.83 3.20 0.92 0.31 Rajasthan 342,239 60.41 20,787 26.96 2.63 0.61 0.11 WB and A&N 104,097 68.64 28,309 24.44 1.25 0.76 0.2 J&K 222,236 55.52 23,943 22.32 2.09 0.54 0.07 North East 176,645 63.25 26,789 18.80 2.48 2.87 0.04 UP 294,411 56.27 17,036 18.33 1.40 0.26 0.06 Madhya Pradesh 443,436 63.74 22,941 17.91 1.89 2.58 0.74 Orissa 155,707 63.08 21,649 16.61 1.85 0.26 0.06 Assam 78,438 63.25 21,700 16.18 1.28 0.17 0.05 Bihar 173,877 47.00 14,113 12.21 1.11 0.1 0.03 Source: CSO, GoI, Census 2001, and TRAI 12 India: The Impact of Mobile Phones Moving the debate forward The Policy Paper Series Number 9 January 2009 an average annual rate of 7.3%, many richer states grew even faster: Gujarat at 8.8%, Haryana at 8.7% and Delhi at 7.4%. Among the poorest and most populous states, Bihar grew at 5.1%, Uttar Pradesh at 4.4% and Madhya Pradesh at 3.5%.19At a policy level, there is a need to recognise the significance of wireless in not only delivery of voice, but also data services, and to stimulate the installation of backhaul infrastructure in rural areas through the use of appropriate incentives. Table 7: A growth of mobile telephony in each state 1 J&K 268.35 2 North East 149.97 3 WB and A&N 141.43 4 Himachal Pradesh 121.46 5 Gujarat 113.21 6 Andhra Pradesh 110.92 7 Assam 110.80 8 Tamil Nadu 109.34 9 Bihar 108.60 10 Orissa 107.05 11 Madhya Pradesh 101.04 12 Haryana 100.75 13 Rajasthan 100.39 14 UP(E) 92.57 15 Punjab 92.26 16 Kerala 87.85 17 Maharashtra 85.01 18 Karnataka 81.67

19 UP(W) 79.91 20 Chennai 64.60 21 Kolkata 62.35 22 Mumbai 55.06 23 Delhi 53.20 Source: Author estimates based on TRAI data; growth rate is annual average from inception of mobile services in each state to March 2008. Despite the massive increase in mobile density in the last three years, access in India is still skewed toward urban areas where much of the industrial base is located. Urban teledensity is seven times higher than rural, which is home to 70% of Indias population. In other words, two thirds of the phones are in urban areas where only 30% of the people live. The urban-rural schism is in some ways starker than the gulf between states. It is therefore worth asking whether mobile technology could bridge the rural-urban divide in the same way as it is has the potential to reduce the divide between states. There are reasons for optimism on this score, although the gap is still wide. The strong mobile growth in 200708 has occurred despite some signs of saturation in urban markets. This suggests there is higher potential future growth in nonurban markets. The latest figures show that at the all-India level, urban teledensity (all attributable to mobile growth) increased by 34% while rural teledensity increased by 62% from March 2007 to March 2008, the disparity reflecting the low rural base. Until now, the focus of mobile operators attention has been on the more lucrative urban markets. The high cost of infrastructure rollout in less dense rural areas and affordability barriers for the rural population are likely reasons. But there are signs this is changing. Infrastructure rollout in rural areas is now eligible for subsidy (described in detail below) and all major providers have reported future plans for expansion in rural India.22 In addition, according to Dipankar Gupta, the village is not what it used to be: 70% of Indias population, 56% of income, 64% of expenditure and 33% of savings come from rural India.23 The rural share of spending on popular consumer goods and durables ranges from 30% to 60%.24 When examining rural data it is important to bear in mind that a small percentage of a large number is a large number. One percent of rural India is 1.4 million households.25 Rural India therefore presents a huge opportunity but it also represents a huge investment for telecoms operators. The key factor is the much lower population density of the rural areas cost is driven largely by coverage (and area), while revenue opportunity is driven by population.

Rural Urban Total 0 10 20 30 40 50 60 70 Mar 97 Mar 96 Mar 98 Mar 99 Mar 00 Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Sep 08 0.3 1.3 4.0 0.3 1.6 4.8 0.4 1.9 5.8 0.5 2.3 6.9 0.7 2.9 8.2 0.9 3.6 10.4 1.2 4.3 12.2

1.5 5.1 14.3 1.6 7.0 20.7 1.7 9.0 26.9 1.9 12.7 39.5 5.5 18.2 48.2 8.4 26.2 61.3 9.4 28.2 66.0 Figure 7: Urban vs. Rural teledensity Source: TRAI

Infrastructure constraints Our research identified some important mobile drivers for productivity improvements in agriculture. But all seven of the focus groups involving predominantly small farmers in Uttar Pradesh and Rajasthan highlighted infrastructure gaps that affected their ability to realise productivity gains through improved yields and higher prices. In order for farmers to realise the full potential of access to new information, they must be able to use it effectively. We found consistently that inadequate infrastructure prevented this. There are four specific infrastructure constraints which limit the ability of farmers to leverage information: insufficient availability of inputs (reduces yield); inadequate irrigation (reduces yield); poor physical access to markets (reduces realised prices); inadequate crop storage (reduces realised prices). Six of the focus groups highlighted problems such as difficulties sourcing inputs such as fertiliser, seed and medicine. There were concerns about the difficulties identifying genuine products as many counterfeits are sold. In several groups the farmers noted that they needed

information that would help them identify these counterfeit supplies, which remain a significant productivity drain in India.29 Three of the focus groups specifically mentioned lack of irrigation as a significant constraint and two of them noted that it had affected the sustainability of growing desired crops.30 One Rajasthani farmer noted that the scarcity of water is the main hurdle for development of agriculture in the region. Farmers reported poor road infrastructure and lack of refrigerated transport as problems affecting their access to markets. Many of the small farmers typically used small carts powered by animal or small engines to deliver their goods to market and said that transport costs represented a prohibitive barrier to accessing markets further afield. This limited their opportunity to profit from market price differences by selling at markets where higher prices may be available. As one small farmer in Allahabad commented, even if he knew the prices in a larger regional market, There were no roads that go there. The lack of storage facilities was cited as curtailing farmers ability to choose when to sell their crop and thereby limiting options to maximize price. One group of farmers noted that lack of storage was a contributing factor to the effective monopoly of local commission agents that they believed caused them to receive lower prices for their produce. As a counterpoint to the findings in Uttar Pradesh and Rajasthan, the farmers surveyed in the five focus groups in Maharashtra did not report infrastructure constraints outside of a limited mention of cold storage concerns.31 There was widespread irrigation and diversification into waterdependent, high-value crops like horticulture.32 There were no perceived concerns with availability of inputs33 or access to markets. Not surprisingly, these farmers consequently reported greater ability to achieve both yield and price benefits from leveraging information. ITCs internet kiosk service is one attempt to overcome some of the challenges presented by inadequate infrastructure, by combining the provision of information on agricultural Wall painted advertisement of ITC E Choupal with mobile number of Sanchalak Farming practices, Allahabad 31 India: The Impact Moving the debate forward The Policy Paper Series Number 9 January 2009 of Mobile Phones practices with other services like insurance along with direct sale of inputs. Recognizing the problems faced by the small farmers in their supply chain, the internet kiosk model

includes information delivery, input provision and direct procurement. It seeks to overcome infrastructure constraints by bringing markets to the farmer. Farmers we interviewed in villages with successful ITC programs reported yield improvements and price improvements as a result of the kiosk program. The primary benefits reported were the introduction of hybrid seed varieties and adoption of new farming practices, leading to productivity gains between 1040%. Farmers noted that by receiving comparative market pricing information as well as a firm price offer in advance from ITC, they had greater ability to choose when and where to sell their products. They also benefited from being to sell to ITCtechniques. While we found a small number who had made changes based on the information they received via their mobile phones, there were some who expressed reluctance to try new approaches even when they had acquired relevant information. ITC staff said that in their experience persuading small farmers to adopt new seed varieties or farming methods often requires a combination of approaches: repeated dissemination of information, demonstration plots and farmer dialogues. Several focus groups in villages where hybrid seed had been introduced noted that the seed companies also promoted diffusion of the seeds through demonstration plots and capacity building measures. It therefore seems likely that for broader rural productivity gains a set of similar capacity-building activities to complement the basic information provision will be required. Vegetable Vendors Vegetable vendors are a familiar sight in most neighbourhoods and residential areas. Almost half of Indias population is vegetarian. In urban areas, homemakers have traditionally bought their daily vegetables and fruits from hawkers who to go from home to home to sell the produce they procure each morning from the wholesale market. Most vegetable vendors operate in a set area (such as a particular residential neighbourhood) and are often known to residents by their characteristic shouts which announce their arrival and invite their customers to buy. But times are changing. The traditional system of buying and selling vegetables has been under pressure in recent times. More women work outside the home. The schedules of vendors and their customers do not always match, causing missed sales opportunities and higher wastage of unsold produce. Vendors are increasingly using mobile phones to overcome these problems. The vegetable vendor serving a 12-storey block of over 100 flats in East Delhi takes orders from the

residents every morning on his mobile. His clients tell him what they need and in what quantity. They can alert him if they have plans which affect their vegetable order, such as a celebration or a trip away from home. The vendor can make up appropriate packets for his clients, who then receive it at the appointed time on their door step. The whole task now takes about three hours freeing the vendor up for other work. His income has risen and the level of service received by his customers has improved. The mobile phone enables the vendor to devise a solution that works for both himself and his clients. He is well-prepared with the packages, bills and loose change. He has a welldefined route covering each floor of the apartment block systematically. Clients appreciate the personalisation and the convenience. Meeting each of them with a prior appointment has given his work a new dignity and to him a new status, as well as making the delivery process more convenient for both parties. This point applies to many other traders such as hawkers, repair persons. Previously seen as a necessary nuisance, their phones give them an opportunity to move up the value chain and the status ladder. Slowly but significantly, Indias traditionally hierarchical society may be becoming a little bit flatter. Given the near ubiquity of mobile phones in urban areas the choice of examples of SMEs of this sole trader variety is predictably large. The eco-friendly deserve a special mention. The waste recycler or raddiwala who buys old newspapers, metal objects and much else from homes to recycle now often makes an appointment with regular clients, unlike earlier when he went on his tiring rounds much like the vegetable vendor above. The clean transport provider, the cycle rickshaw puller, who helps people move in crowded inner cities, when he has a longer booking say, half day or full day might ask shoppers who want to stop often, to call him when they are ready while he moves to park in less crowded part of the city nearby. A priest in the busy (and for him also lucrative) wedding season, when a city may have hundreds or even thousands of ceremonies, might perform several in a single day. The sight of him coordinating his movement with clients as he is taking more requests to officiate in others, may be relatively new, but is increasingly familiar. JustDial, Mumbai, Maharashtra As personal access to telecommunications increases, more personalised services can be delivered to subscribers. In India, widespread access to the internet is many years away, so other

means of accessing information offer value. JustDial, which began operations in 1994, provides directory services on the lines of the familiar Yellow Pages to help its users to identify and reach a wide range products and services. Callers dial its easy-to-remember phone numbers in different towns and are provided with information by JustDial staff. The range includes helping somebody to locate a plumber who can fix a leaking tap, a tutor for a student, a shop selling decorative tiles for floors, listings information about new film releases, or details of restaurants offering pizza within a certain budget, JustDial can help with an ever-expanding range of queries, and is free for callers; Its revenues come from businesses paying for a listing, as well leads that JustDial generates for them. JustDial now supports SMS delivery that can contain more information such as additional phone numbers, addresses and other relevant information. JustDial, which had start-up capital of US$1000, 14 years ago, has annual revenues of $17 million and a $100 million dollar valuation company today on the back of its information business. Its creator, in a recent interview,12 attributed his companys continuing success to the telecom revolution in India, which is largely fuelled by growth of mobile phones. Without this growth, the substantial JustDial business would be significantly smaller as the accessible market would be limited. Mobile phones have clearly allowed the business to expand. They also enable users to receive the information they seek more efficiently via SMS if they choose. JustDial is a very direct example of how economic growth is created as a consequence of increased teledensity. Radio Cabs A number of more recently-founded radio taxi services such as Meru Cabs, Easy Cabs and Mega Cabs have become available to Indian urban consumers in recent years. These newer players leverage GPS and mobile technologies in an integrated fashion. Typically, the client of a radio cab company calls for a taxi an easy-to-remember phone number like 44224422. With the GPS technology deployed in the companys call centre and in its cars on the road, it is easy to scan the neighbourhood for an available cab. The same system is able to call the driver in the car to confirm if and when he can reach the client at the requested time. Radio Cabs currently operating in 4 cities, Delhi, Mumbai, Hyderabad and Bangalore is estimated to have attained revenues of Rs54.7 million (US$) in barely 4 years since the first services began.13 The market has grown over 50% annually in recent years. Meru, the largest in size, is less than

one year old. Radio taxis offer more transparent billing to customers and can often be less expensive than the ordinary taxi with the meter running as the older technologies can be tampered with more easily. Not surprisingly, the radio cab business has flourished in recent years. Table 4 Radio taxi firms Company Already operational Fleet size Expanding in cities Meru Cabs Mumbai, Hyderabad, Delhi & Bangalore 1600 Chennai, Kolkata & Pune Select Cabs Hyderabad 100 Delhi & Mumbai Forsche Mumbai & New Delhi 6070 Mega Cabs Delhi, Chandigarh, Mumbai Goa & Hyderabad Easy Cabs Chandigarh, Delhi, Hyderabad & Bangalore 1400 Mumbai, Chennai & Pune Source: http://www.travelbizmonitor.com/radio-cabs-switch-to-top-gear-in-india The managers and the drivers have a healthier working relationship since the technology whose exact use varies between the taxi companies offers the drivers equitable access to lucrative and less-attractive routes, and makes monitoring of their performance transparent. Managers can control costs and quality far more effectively. This means that good drivers are easier to reward and retain. Driver incomes have risen. Equally important, the quality of environment in which they operate has improved noticeably. Drivers find their work hours more predictable and are able to devote quality time to their families.

LabourNet, Bangalore LabourNet is an example of how the delivery of basic services (such as plumbing, the repair of appliances and maintenance services) can be transformed through better organisation facilitated by mobile phones. Mobile phones have enabled LabourNet to deliver better service to customers with more consistent service standards and quality. At the same time, mobile contact allows the individual tradesmen to regularise their work and become more productive. With increasing economic activity, especially relating to the IT sector, Bangalore and Hyderabad have seen huge demand for construction-related activity. LabourNet is attempting to create an effective and non-exploitative marketplace for construction work. Traditionally in Bangalore, a client employs a Maistri (usually a small subcontractor or independent foreman) who is usually entrusted with the task of putting together worker teams for a specific construction project. The Maistri, a critical intermediary between clients and the informal workers, has obvious clout. Given the vulnerability of the workers, the Maistriworker relationship is rarely transparent or documented, and frequently exploitative of the workers involved. The LabourNet initiative was started in 2004 by Maya, a non-profit agency, with headquarters in Bangalore. It has created a network of workers in the informal service sector that can serve the construction, housekeeping, gardening and transportation needs in the major cities of India by using technology to help them find jobs and business opportunities. The initiative currently includes 200,000 workers and is envisaged to extend to a million workers over the next 7 years in 7 cities around India. Maya aims to improve lives and livelihoods of traditionally badly paid self-employed construction workers. A variety of tradespersons ranging from masons, carpenters, plumbers, electricians and so on to more specialised trades such as water proofing experts, interior decorators, stone cutters, metal bar benders and many more are registered on LabourNets database. Potential clients call LabourNets call centre where staff can match their needs with workers on its database with appropriate skills, and also the fees and other specific characteristics which may be relevant for the proposed assignment. A plumber may, for instance, not be willing or able to work on high-rise buildings. All workers registering with LabourNet require a working mobile phone on which they can be called in case there is work for them. This mobile linkage is critical since the workers,

who typically live in the urban slums, cannot be reached in any other way. They may even lack a stable or permanent residential address. Also, many workers are often on-site when they need to be contacted. LabourNet solution benefits clients as well as workers. Clients get workers who are checked and known to LabourNet. They can access the workers individual history, skill sets and employment experience. Since wages too are included in the database, there is little room for last minute disputes or unexpected re-negotiation of rates. For workers, LabourNet brings much additional value besides new work. It gives them a formal identity card which serves in many other situations for example accessing buildings or other services. The tracking of their performance can help them negotiate higher pay over time. In addition, registering workers can open their own bank account, usually extremely difficult for itinerant and especially poor workers. All registered workers get accident insurance and can opt also to buy health insurance a substantial source of security in the vulnerable world that most informal workers inhabit. The number of registrations has more than doubled each year since the initiative started in 2004. As mentioned, in addition to the Maistries, individual wage earners also register with LabourNet. As might be expected (see Table 3) while the Maistries spot the value of a LabourNet registration first, growing numbers of wage earners who have mobile phones, also starting to do so.

The impact of mobiles in the SME sector We distinguish between two ways in which SMEs can use mobile telecommunications. Firstly, and most directly, SMEs can build specific business models around mobile services e.g., developing applications for WAP or SMS-based

booking services, or information services (e.g. BookMyShow, JustDial). The mobile phone is enabling more creative and service-oriented business models that are directly creating employment opportunities. This mobile value added services (MVAS) market which provides services and applications that run on mobile phones or networks is expected to reach over US$3 billion in revenues in 2009.2 The MVAS market offers services of all kinds ranging from entertainment (e.g. film gossip, gaming) to potentially life-saving emergency information about nearest hospitals. This emerging MVAS business is driven by several major SMEs including companies who specialise in technology (e.g. Bharti Telesoft, OnMobile), mobile entertainment (e.g. Hungama), mobile marketing (e.g. ACL wireless, mobile2win, Indiatimes), and the emerging areas of mobile payments (e.g. mChek, Obopay, Ngpay), and location-based services (e.g. MapmyIndia) In this paper, we look at two examples in particular SMSOne and the JustDial service which have created new business opportunities through mobile. Perhaps more interesting is the second and indirect kind of impact of mobile. How can SMEs in general use mobiles to enhance their productivity and the efficiency of their value chain? Small businesses often face challenges in scaling up their businesses. This may be due to lack of funds or inadequate access to markets but it can also be due to the basic problems of communications and interrelationships as their businesses grow. We were interested in exploring how smaller businesses use mobile phones to overcome these communications challenges. We have found a great wealth of examples of how mobile communications are enabling SMEs to move successfully up the value chain and become more profitable; mobiles mean they can provide a better service and achieve greater efficiency in their businesses. Arguably, the mobile phone Professor of Economics, ICRIER Professor, IMI Prof. Rajat Kathuria Director, Com First (India) Private Ltd Dr. Mahesh Uppal Dr. Mahesh Uppal is the Director of Com First (India) Private Ltd, a consultancy specializing in policy, regulation, and strategy. Rajat Kathuria is Professor of Economics at ICRIER, and is also a professor at the International Management Institute (IMI), New Delhi. 52

India: The Impact of Mobile Phones Moving the debate forward The Policy Paper Series Number 9 January 2009 is permitting SMEs to make the transition from the street corner to the formal economy, with its attendant benefits of decreased vulnerability and increased incomes. The case studies we have selected here range from individually run businesses like Ranjit the henna artist, described below, who started on the pavement but has now transformed his business in both geographical scope and in scale to become much more substantial to bigger SMEs like the taxi cab companies which are using mobiles to deliver a better service to more clients and operate more efficiently. In all of the very different examples we consider, the use of mobiles, combined with other enabling factors including other technologies such as GPS, allows capable entrepreneurs to benefit customers, employees and ultimately, of course, themselves. The details of the ways in which mobiles are used vary depending on the size and nature of the business A survey of usage of mobile in poor urban areas India is an increasingly urban country, with over half a billion people expected to live in towns and cities by 2020. More than one fifth of the urban population lives in slum areas, and in some major cities the slum areas account for almost half the population. With large numbers of migrants arriving from the countryside in search of better opportunities, the slums are growing. This makes the economic and social dynamism of the slums a central issue for development. The key policy question is whether life in the slums can become the focal point for an economic and social transformation which will alleviate poverty. The alternative is that they will remain traps of despair and poverty. The rapid urbanization of the Indian population and the consequent strain on urban infrastructure means that the economic and social plight of those living in the slums will be one of the defining characteristics of India during the next twenty years. This context makes it crucial to develop public policies and private opportunities which will allow slum dwellers to find ways to address their particular needs. This paper seeks to analyse the uptake and use of mobile telephony within some of Indias urban slums, and its effect on the economic and social lives of their inhabitants. Few innovations have become as pervasive as quickly as the mobile phone. While there is much anecdotal evidence on the ways mobile use can improve the social and economic status of poor people, there

is little systematic evidence on the benefits of mobiles for these groups. The impact of mobiles on agricultural productivity Sanjay Gandhi is a consultant with expertise in private sector development, and technology and business strategy in emerging markets. Gaurav Tripathi is a researcher at ICRIER Introduction The agricultural sector is critically important in any developing economy and no less so in India, where it contributes close to 20% of GDP and where 60% of the population depends on agriculture either directly or indirectly. As India urbanizes, the urgent need to alleviate poverty amongst both rural and urban populations makes it essential to catalyse agricultural productivity. The Indian agricultural sector, however, despite periods of strong growth in the past, has more recently experienced low productivity growth. Serious challenges must be addressed in order to achieve faster productivity growth, including infrastructure constraints, supply chain inefficiencies and also significant problems in the diffusion of and access to information. Smallscale producers, who make up the vast majority of Indian farmers, are often unable to access information that could increase yields and lead to better prices for their crops. The increasing penetration of mobile networks and handsets in India therefore presents an opportunity to make useful information more widely available. This could help agricultural markets operate more efficiently, and overcome some of the other challenges faced by the sector. A key backdrop to our investigation is the recent research by Robert Jensen examining the impact of mobile phone use by Kerala fishermen.1 Jensen found that the introduction of mobile phones decreased price dispersion and wastage by spreading information which made the markets more 22 India: The Impact of Mobile Phones Moving the debate forward The Policy Paper Series Number 9 January 2009 efficient. Mobiles allow fishermen, particularly the somewhat more prosperous ones, to get timely price information and decide the best place to land and sell their daily catch. A more recent paper by Reuben Abraham also looking at Kerala fishermen found that widespread use of mobile phones increased the efficiency of markets by decreasing risk and uncertainty, although it noted that realizing the potential

efficiencies depends on easy access to capital, especially at the production end of the supply chain.2

Total employment in the sector to reach 10.3 million in 5 years.Communication will be amongst the Top 3 growth drivers of the economy by 2015

Communication sector is predicted to emerge as the single largest sector of Indias economy, with a 15.4% share (equivalent to Rs.865,031 crore) of GDP by 2014-15. In Indias transformation from an agrarian to a services economy, communication is recognized as the fastest growing sector, growing by 25.7% during 2001-08. The communication sector will thus be one of the major drivers of the Indian economy in the next five years. Its ranking in terms of contribution to total GDP has moved up from #17 in 1980-81 to #8 in 2007-08 and is further expected to surpass all other sectors by 2014-15, assuming that all other sectors grow at the average growth rates observed during 2001-08. Telecommunication sectors share of total GDP has increased from just 0.7% in the 1980s and 1.0% in the 1990s to 3.6% during 2001-08. In 2007-08, the sector accounted for 5.7% of GDP. Trade, Communication and Registered Manufacturing have shown more than 10% contribution (16.7%, 12.24% and 11.68%, respectively) to GDP growth during 2001-2008; however, the Communication sector has outperformed the others despite its share of total GDP being only 3.6% as against the shares of Trade (14.0%) and Registered Manufacturing (10.2%). The communication sector has also had a significant impact on employment in the country. The study predicts that the sector will generate an additional 8.5 million jobs by 2014-15, taking the total number of jobs in the sector to 10.3 million.

Thus, the communication sector will continue to be an engine of the Indian economy over the 4/5 next years. The role of communications in accelerating socio-economic development should not be underestimated. Communication is having a positive impact on employment in the services and retail sectors, and helping the country to emerge as a major manufacturing power. It is critical to empower every individual to connect to people, information and services regardless of their location or income. This is a key element in the vision of a truly inclusive knowledge society. Connected people can create, accumulate and disseminate knowledge, eventually leading to enhanced productivity and equitable socio-economic development. This latest study reiterates communications growing importance as an agent of transformation.

Table: Sectoral contribution to Indias GDP