Flickering Lifelines: Electrification and Household Welfare in India

This study moves beyond counting electrified households as the policy consensus on electrification and examines the effect of reliability of electricity on household's welfare in India. We analyse two household surveys covering the period from 2005 to 2018, and examine the effect of additional hours of electricity using panel fixed effects instrumental variables regressions. We focus on the intensive margins of deficiency, i.e. how additional hours of electricity in a day affects household's consumption expenditure, income, amenities, assets, borrowing and the status of poverty among others. Results show significant effects of an additional hour of electricity overall, especially among the poor households in rural India. The findings are robust to alternative ways of measuring household income, the use of alternative datasets to measure the effects on reliable electrification, as well as other robustness checks. The study recommends progressive pricing with targeted subsidies for the electrified households to increase household welfare while reducing the financial losses of the State Electricity Boards.