Telecom and Economic Growth Nexus in Indian States: Empirical Investigation Using Pooled Mean Group

Abstract

The paper examined the linear and non-linear relationship between telecom infrastructures and economic growth using data on Indian states from 1991-2017. The results from Pooled Mean Group show that the linear impact was positive. The non-linear effect was positive in the short and the long run, thus favouring network externalities claiming that telecommunication infrastructure was subject to increasing returns. In addition, segregated analysis arrived at exceptional results; absence of linear and non-linear relationship for the low-income states in the short run while the same exists for high penetration states; the long run results were positive and significant for both sets of states, magnitude was more for low penetration states. The positive non-linear returns can be interpreted along the financial inclusion element like JAM trinity, LPG subsidies, etc. Mobile telephony in the low-penetration states must be pushed to remove inroads in growth and help to garner a larger private investment and public welfare. Keywords: Dynamic estimation, gross domestic product, network externalities, teledensity. JEL Codes: C23, L96,O40, O50.