Telecommunication Services and Economic Growth: Evidence from India

Abstract

This paper estimates the contribution of telecommunication (or telecom) services to aggregate economic growth in India. Estimated contribution is distinguished between public and private sectors to highlight the impact of telecom privatization on economic growth. Knowledge of policy determinants of demand of telecom services is shown to be essential to enhance growth contribution of telecom services. Using a recent sample survey data from Karnataka State in South India, price and income determinants of demand for telecom services are estimated by capacity of telephone exchanges Estimation results offer evidence for significant negative own price elasticity and positive income elasticity of demand for telecom services. In addition, survey data are used to show for non-economic factors that influence demand for telecom services including non-awareness of the usage and cost of value added services. These results have implications for design of a national policy for promotion of demand for telecom services and economic growth.