Modest returns to village electrification in India

It's commonly believed that increasing access to energy will have multiplier effects, especially in rural areas - kids can study longer, women save time on household chores giving them bandwidth to be engaged in other productive activities, households can start small businesses etc.

A new paper by researchers of University of California, Berkeley finds that the returns to electrifying villages in India have been modest and not as much as expected, at least in medium-term. 4 lakh villages were considered in this study.

The paper further says that the results hold up in areas with high  reliability of electricity as well those with low reliability (number of hours of supply) of electricity. Results also hold up for districts where villages were electrified in the beginning and those who where it was done later, thus ruling out any bias.

It doesn't mean that villages shouldn't be electrified nor does it mean that the quality of electricity shouldn't be improved. The fact that increasing access to energy has given good returns in other developing countries but not in India suggests that we may have not have leveraged the advantage of increased energy access, by using it to increase productivity. In other words, we may have fallen short of ensuring other prerequisites that make energy access productive.

We must also note that the quality of electricity supply (reliability) is low in rural India. A survey of six major Indian states finds that villages receive only 12.5 hours of electricity per day on an average and there is a blackout of 3.6 days per month.

There are lot of challenges in improving the quality of supply - distribution issues, cost recovery etc. Smart grids is increasingly being proposed as a solution. I blogged earlier that we need to be careful about this too as the reality is different and they aren't working out in many places.

Seeing all this together, it seems that one can't escape from improving quality of grid electricity. In order to leverage this, we must also focus on other prerequisites like connectivity, skills etc. In case of energy, it calls for commitment from governments, with huge investments in infrastructure, along with innovation in bill recovery. Behavioural economics serves as a good tool in thinking through these final mile problems.


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