What is the empirical evidence for any linkage between
investment in telecommunications infrastructure and economic growth
in developing countries? The question is important for two reasons.
First, it would help policy makers in taking investment decisions.
Secondly, it would also help them in deciding the extent to which
they should lend their proactive policy support to the ongoing
information and communication technology (ICT) revolution in the
developing countries, particularly in India. Kala Seetharam Sridhar
(kala@...), Fellow at the National Institute of Public
Finance and Policy (NIPFP), New Delhi and Professor Varadharajan
Sridhar (Sridhar@...) of Management Development Institute,
Gurgaon who have investigated this relationship in data for
developing countries, therefore, need to be congratulated for
undertaking this timely study.*

Roller and Waverman (2001)1 have looked at how telecommunications
infrastructure affected economic growth in the developed economies
but no such study has been taken for developing countries. Overall,
the literature estimates that one percent growth in telecommunication
services generates three percent growth in the economy (Gupta, 2000)2
(p-11). This study, using data over 1990-2001 period for 63
developing countries shows that the compounded annual growth rate
(CAGR) of cell phones over the period 1996-2001was 78 percent
compared to a growth of mere 7 percent for main telephone lines over
1990-2001(p-13).The study estimates that a 1 percent increase in tele-
density (total telephones per 100 population)increases national
output by 0.14 percent(p-19).

This study also reports that cell phones are the only ones that
contribute significantly to national output. It reports that a 1
percent increase in cell phone penetration can cause output to
increase by 7 percent.(p-21). One of the important conclusions of the
study is that at the envisaged tele-density of 7 by 2005 and 15 by
2010 in India its GDP in 2005 would be US $ 529 billion, 7 percent
increase over its 2001 actual GDP. In 2010, with tele-density of 15,
India's GDP would be US $589 billion, 19 percent increase over its
actual 2001 GDP. If India were to have Ukraine's tele-density of
20,which is the highest in the sample), holding its capital and
labour resources constant, India's GDP would be $614 billion, a 24
percent increase over its actual 2001 GDP (pp 23-24). The study
predicts that India's tele-density will reach 14 by 2006. The authors
indeed expect that India will reach the figure of 15 in 2006, much
ahead of the target (p-24).

The study is highly recommended to any one interested in the
linkage between investment in telecommunications infrastructure and
economic development in the developing countries.

Dr D.C.Misra
October 2, 2004
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* Sridhar, Kala Seetharam and Varadharajan Sridhar (2004):
Telecommunications Infrastructure and Economic Growth: Evidence from
Developing Countries, New Delhi, National Institute of Public Finance
and Policy (NIPFP), March, Working Paper No. 14, 40 pp, available:
http://www.nipfp.org.in/working%20paper/wp14.pdf (accessed October 2,
2004).
____________________________________________________________________
1 Roller, L.H. and L. Waverman (2001):Telecommunications
infrastructure and economic development: A simultaneous approach,
American Economic Review, 91(4):909-923.
2. Gupta, N.K (2000): The Business of Telecommunication, New Delhi,
Tata McGraw-Hill.