Exploring the Causal Relationship between Telecommunications and GDP Growth in India, 1988-2007

In the emerging global economy telecommunication sector has made a significant impact on economic growth. Amongst various components of infrastructure, telecommunication as a determinant of economic growth is somewhat different because of the network externalities, a phenomenon that increases the value of service with increasing number of users. Recent growth in network infrastructure and tele-accessibility in India has been phenomenal. The present study investigates into causal relationship between rapidly developing telecommunication industry and economic growth in India. It is found that in the short-run, growth of telecommunication is influenced by growth in the Gross Domestic Product (GDP), while the reverse does not hold true.