Friday, February 09, 2007

How many people in India are well out of deprivation?

One way to think about poverty and deprivation in India is to focus on the poverty line, and to try to count the people who don't get 2200 calories/day (or $1/day). One problem here is that measurement of poverty is weak. And, even if a lot of people get past this low threshold, it's a hardly satisfactory destination for the Indian development project. Such abysmal consumption is unacceptable in absolute terms, given the technological knowledge possessed in the world today. "Upper middle class" India is poor when placed in the context of the global income distribution.

Another way of thinking of the progress of the Indian development is to turn this upside down, and count the people who have achieved a good quality of life by world standards. I find ownership of a telephone to be an interesting proxy of income and wealth. (a) A person is not going to get a phone if basics like food and clothing are out of reach. Anyone who buys a phone costing Rs.2000 is a potential customer for anything at a price point of Rs.200 or below. (b) Measurement of the number of telephones is a lot better than measurement of poverty from NSS data.

I'm going to do a bit of hand-waving here. Do tell me where you disagree.

  1. Today, we have a data release showing there are now 150 million mobile phones.
  2. The land lines are a bit more than 40 million.
  3. This adds up to 190 million telephones.
  4. Some phones are surely in offices are shouldn't be attributed to households. But these are generally likely to be land lines, of which there are only 40 million. I'm going to assume that half the land lines are at home. Then we have 170 million telephones with households.
  5. Assume there are 5 persons per household.
  6. Assume that among phone-owners, there are 1.5 phones per household.
  7. In this case, there are 566 million people in India who are in a household which has at least one phone.

Hmm, that's interesting - roughly 53% of the population is in a household that is out of deprivation enough to have a phone. So the Indian development project is a bit more than halfway through. If you agree with this approach, then we're making meteoric progress, because the number of phones is simply exploding. There are two effects at work every year: the pdf of income is shifting right, and the vertical line (the price of a phone) is shifting left.

I found it amusing to look back at a piece written by me in 2000 based on a similar idea. The numbers were all picayune then. At the time, there used to be a debate between two views on the Indian income/wealth distribution. There were those who felt that there was a small cream - the top decile - of India which was affluent, and once cellular phones achieved ubiquity in this group, then after that growth would collapse. I was in the other position, where it was felt that as phones got cheaper and incomes rose, there was an enormous upside for telephony - well beyond 10% of the population. In the event, this view pretty much worked out correctly.

These are not just idle discussions about the Indian development project; these perspectives affect planning in the real world also. Imagine if you were a mobile phone company in India when there were 5 million phones out there. Would you have done strategic planning where you were envisioning a market size of 10 million phones in few years? Or would you have understood that in five years the world's biggest GSM tender would happen in India?

4 comments:

  1. You're assuming the phones are equally distributed. If the top 50 m households have 3 phones each, that takes care of 150m subscriptions, leaving little for the rest.
    Nevertheless, the question is---does the fact that mobile subscriptions are growing at a monthly rate of over 5% indicate that poverty is going down rapidly? Or is it because mobile phones haev become indispensable to business, including to petty traders, plumbers, cab drivers etc? If you look at the pfce numbers, the proportion spent on "communications" has moved up in recent years.

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  2. This calculation does require making assumptions about the average number of phones per household for the households that have > 0 phones. I assumed an *average* of 1.5 for all the households under examination. I don't pretend that there is any empirical basis for this. If you disagree then you'll need to tweak the final number in your mind by a commensurate amount.

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  3. Sorry, I didn't answer the second.

    My limited claim is this. By the time a person has a mobile phone costing Rs.2000 - for any reason, ranging from a teenager seeking better leisure to a plumber who can't live without it - we can be sure that there is no deprivation with this person. These are the households where you can be sure that the extremes of poverty are done with.

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  4. Instead of just telephones, how about using the number of TV sets and LPG customers? See http://ecothink.blogspot.com/

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