Where has the money gone? Here it is…

India’s Gold reserves with RBI are approximately Rs.1.25 lakh crores.

But, India is spending almost double this amount every year, on mobile services and handsets. And that is about 2.06% of India’s GDP…

Telecom and Mobile handset industry is where the money from average consumer’s pocket is going. No wonder most of the markets are reeling under slowdown. India spends less on goods and a lot of time and money on talking…

Check some interesting numbers to get a better perspective :

India’s GDP in 2012-13 : Approx Rs 114 lakh crores (Reference :Wikipedia)

India’s Telecom Services sector revenues in 2012-13 : Approx : Rs. 2 lakh crores based on Q4-2012-13 report of TRAI (Reference : TRAI Report for Jan-March 2013 Quarter)

Mobile handset sale of last 2 years : (Reference : Economic Times article here.)

a) 2011-12 = Rs. 31,330 Crores

b) 2012-13 = Rs. 35,946 Crores

That means, EVERY YEAR, approx Rs. 2.35 lakh crores are being spent in India on Mobile services and handsets. That is approx 2.06% of India’s GDP. Considering approximately, 120 Cr population of the country, this works out to about Rs.2000 average PER HEAD PER YEAR….!!!

This means that out of about Rs.90,000 per capita GDP, EVERY Indian is spending average Rs.2000 per year on mobile phones…! Now that is a significant number…! A lot of Indian money is turning into hot air.  This has a very serious possible repercussions on the Indian economy.

1) Notwithstanding the immense communication advantage of mobile and Value Added Services and their contribution to the economy at large, the actual productive usage of these facilities is comparatively lower. Most of the mobiles are used for non-productive purposes (Chatting, Social Media, Group messaging,  Playing games,Listening to music, as a Camera etc.). Along with money, this is wasting a lot of productive time of the country’s populace. The general population, newly exposed to this technological solutions, is behaving like a small child who has suddenly entered a room full of toys. The instincts ‘to be there among the crowd’ is costing the economy a very huge amount of productivity. Unfortunately, this will be realized later than sooner.

2) A lot of this money is going out of the country, as most of the telecom hardware, mobile handsets and accessories are imported. This puts a lot of pressure on the Indian rupee.

3) With many of the family members now having their individual mobile phones, the monthly budget of the average household is very strangely skewed due to mobile hardware and services claiming a significant amount. A lot of essential goods and services are becoming predictably unaffordable due to this imbalance in the household income and expenses. This is one reason why all other markets are reeling under reduced demand.

4) The social impact of ‘the mobile revolution’ is generating a lot of lonely souls, destroying the fabric of relationships. This also gives rise to a lot of psychological disorders. Small children exposed to mobiles early on are reducing time on physical activities and spending a lot of time on mobiles, limiting their wholesome physical growth. All this finally impacts the general physical and mental health of the country and then to the economy.

It will be good if the child gets wiser after playing with the new-found toys for a while and getting back to its normal life.

Otherwise, these toys will prove to be very expensive for the economy in the end.

Author: Sanjay Shah

Sanjay is the author of "Business Management Simplified" which provides Practical, Actionable Solutions for Entrepreneurs. It is an all-in-one guidebook to start, run and grow a small and mid-size business to the next level. He is also an SME Business Coach, Seminar Leader and Motivational/Keynote speaker, Sanjay is based in Mumbai (India). He advises many businesses on Strategy, Leadership, Marketing, Branding, Customer Experience Management and Organization Development. He conducts various self-help seminars and workshops for companies and groups in English, Hindi and Gujarati. For more info, visit : www.SanjayShahSeminar.com

5 thoughts on “Where has the money gone? Here it is…”

  1. yes, entrepreneurs are suffering lot in India, specially small entrepreneurs.
    please, call when u hold seminars 4 them…at 9426214800:Neerav
    wish to know that what do u teach them, all my best wishes!

  2. To me…its very immature article. Yes…lots of money is going into mobile space and yes…most of this is under utilized like people don’t really use all feature for productive use. But that is how all new technologies have come-up. If you remember computers, primarily playing Solitaire and those funny DOS games where it was used a lot. People got comfortable and started for something more meaningful.

    chat – mostly categorized as useless, but its powerful tool for people who used to hardly talk. small talks. Sending scanned copies are now old school. I saw hardly-literate person sending courier receipt on whats app with some Chinese mobile to someone. Didn’t it save fuel, effort, time ?

    I have doctor family around. they ask their patient to send report via email/whatsapp. Its funny, that I , a computer engineer, got introduced to whatsApp by these people…! — So just saying its used for useless purpose might give you some audience , but its not complete truth.

    As far as “making them lonely” not sure why you look at like that…Its very useful for
    lonly people
    I agree, Like many technologies, including computer, mobile, tablets, phones etc…very large number of people dont utilize them fully. Or rather for not-so-useful purpose….

    small businesses with hardly any understanding of computer and allergy to keyboard
    are using mobile email effectively.

    but compare with Gold..! Which sits in cupboard or bank locker and given as inheritance or used to “shield against inflation” ….We are spending $ money in relatively more useful thing.

    1. Dear Jigar

      I accept your views as another perspective. I don’t deny the usefulness of mobiles toward the economy and communication advantage it offers. But, comparatively, it is lower. Also, the psychological damage that the loneliness is causing, it is too immense to neglect.

  3. Some great insights you have presented there.

    I agree with many of the conclusions you have drawn (some of them profound), and it is difficult to argue with you on these points:
    1. mobile-related hardware imports putting large pressure on rupee (brilliant insight)
    2. distraction to children and reduction in their physical activity.
    3. increase in cost of living of average household (very true since even people with limited income are seeking relatively expensive phones).

    But the other points you make are not as straight-forward as you put it.
    1. Chat and other forms of communications are not as useless as you imagine. The net value such activities bring are very hard to quantify, but mobile communication does help increase business and improve efficiency. Here is an example which shows how the technology has helped fisherman increase their business and reduce the wastage.http://www.economist.com/node/9149142
    There are countless other examples as well.

    2. The use of mobile phones for non-productive activity can also be questioned. The same could be said of lot of things like television, movies, professional sports, music, books, internet, etc, to different extents. Some would argue that these lead to decrease in productivity. Others, would say that it improves the quality of life by providing new avenues of recreation. The truth is somewhere around the middle. Clearly, all these things should be used in moderation.

    3. “A lot of Indian money is turning into hot air.” and 2 lakh crore being “spent”. This money is not really being burnt. It is circulating in the economy. Some of it leaves out the country through foreign MNCs like Vodafone. Some gets in to India through Indian MNCs like Airtel which operates in about 20 countries, if I am not mistaken. Granted, all the profit is going from the pockets of about 1 billion Indians to shareholders leading to concentration of wealth. But telecoms being a low-margin/high-volume business, a lot of the money also goes to employees and other people. Also don’t forget there is a sizeable cottage industry of recharge shops, mobile shops and service centers revolving around this.

    4. India does export one commodity related to the mobile industry- which is software, i.e. apps. Being in the startup world, I know this for a fact. Lot of it involves work that is outsourced by foreign companies, but also there are apps being developed and sold as products abroad. It is a healthy ecosystem having everyone from large consultancies and BPOs to college students and grads.

    5. I don’t agree with the alleged negative social impact of mobile. In fact even less technologically-savy people like old and poor are using these devices. My father takes much more photos on his phone than I do. And they also provide the only link between countless migrant workers and their families. It is these sections i believe who really take to mobile technologies like MMS and video-calling.

    If you want a real example of an activity that harms the economy, take the gold and gold loan companies. India being the largest consumer of gold in the world; that is what puts real pressure on the Indian currency. Gold forms a good form of savings for the poor, but lot of the profits from the industry go to a very few, very rich people. And don’t get me started on the gold loan NBFCs like Muthoot who rake in billions by charging exorbitant rates on the poor and ignorant sections of the population, at almost zero risk to themselves. (borrowers can take a loan on only 70% of the value that they pledge)

    1. Dear nedr

      I agree with all your additions and corrections.

      Yes. Gold is another investment which puts the circulating money to sleep and affecting economy in a big way.

      Thank you for adding a lot of value to the points presented through your unique insights.

      – Sanjay

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