Cellular theory of growth | india | Hindustan Times
Today in New Delhi, India
Jan 25, 2017-Wednesday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

Cellular theory of growth

india Updated: Jul 06, 2011 12:13 IST
Highlight Story

Until about three years ago, Nizamuddin Ansari, 65, a retired head clerk from the Indian Railways mail service, spent most of his days on the verandah at home.

The monotony of watching over his courtyard would be broken by the occasional money order from his sons employed in Jeddah in Saudi Arabia and Dubai.

Then, the small plot of unused land he owned next to his house got a celebrity tenant: Bharti Airtel Ltd. The company wanted to set up a phone tower on the plot before it made a debut at Olhanpur, Ansari’s village of some 25,000 people, in Bihar’s Chapra district.

There was much excitement in the Muslim-dominated village, whose economy was sustained mainly by remittances from West Asia and small-scale farming.

Ansari recalls the villagers were thrilled at the prospect of not having “to depend on dead fixed-line phones, phone booths or a neighbour’s landline for receiving or making calls”.

The land would bring a monthly rent of Rs 10,000, adding to the family’s income of around Rs 50,000 sent home by family members overseas and from farming.

Within a year of Bharti Airtel entering Olhanpur in 2006, Ansari gave up his landline connection provided by Bharat Sanchar Nigam Ltd, and bought five mobile phones for his family of 11, mostly women.

All the connections were from Bharti Airtel. The phone firm launched its services in Bihar early in 2005, and in the four years since, has built a coverage presence in all of the state’s 38 districts.

One out of four of Olhanpur’s residents have a phone, say Bharti Airtel executives— double the 12.6% phone penetration in the country’s villages and small towns.

Olhanpur is the typical target market for firms such as Bharti Airtel and rivals Reliance Communications Ltd and Vodafone Essar Ltd, which have been aggressively courting customers here for the last two years.

Poorly served by state-owned fixed-line phone firms and deterred by the difficulty of procuring such connections, customers in these pockets are increasingly turning to mobile phone services. Within 12 months of Airtel building its tower at Olhanpur, Reliance Communications entered the market.

In January, two more competitors, Vodafone Essar and Idea Cellular Ltd, reached the village. In Pathera, a neighbouring village, Airtel’s distribution march is also at work. At a paan shop, its proprietor Mukesh Chaudhary makes an additional Rs 45 a day selling recharge coupons.

“Earlier, every passer-by would run into my shop asking for recharges. I figured this was also a product I could sell,” he says.

In neighbouring Khaira village, Airtel distributor Rajesh Pandey makes hundreds of photocopies of an e-mailed leaflet of the company’s latest tariffs to distribute in local markets. “We have no time to lose when a new offer comes.

Photocopies of the schemes reach faster and are more economical,” says Pandey, who distributes Airtel coupons. Many such ancillary and new businesses are mushrooming around phone services at Olhanpur.

As phone services spread in rural India — according to latest data from Trai, some 27.6% of India’s nearly 400 million phones (including around 38 million fixed-line phones) were in its villages and small towns—slow but potentially big changes are taking place.

At a broader level, economists say the spread of mobile phone usage is cranking up economic growth through enhanced productivity.

A January study by the Indian Council for Research on International Economic Relations, or Icrier, says increased penetration of cellular technology has contributed to higher and more inclusive economic growth.

States with 10% higher mobile phone penetration than others, it concludes, have grown 1.2% faster.

The economic benefits are yet to reach states such as Bihar, which has to boost its state-wide teledensity of 16% by at least half to reach the ideal benchmark—the study found benefits begin to accrue once penetration crosses 25%.

“If Bihar were to enjoy the same mobile penetration rate as Punjab, then, according to our results, it would enjoy a growth rate that is about 4% higher,” the Icrier report says.