Electrification seems like an essential poverty reduction policy. However, The Borgen Project spoke with Professor Fiona Burlig, an economist at the University of Chicago Harris School of Public Policy and a fellow at the Energy Policy Institute at the University of Chicago. Professor Burlig conducted a recent study on a government-led rural electrification program in India. She clarified that electrification is only worth it if the village getting electricity has a large population. Smaller villages with only 300 people receive too small a benefit relative to the cost of electrification. Therefore, this poverty reduction policy is not as beneficial for this population.
Instead, Professor Burlig said that development economists, nonprofits and non-governmental organizations should focus on two strategies. First, they should try to make electrification technology cheaper. Then, they should fund other poverty reduction policies that have been proven to improve welfare in a cost-effective manner.
The RGGVY Electrification Program
The electrification program that Professor Burlig investigated in her paper, Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), roughly translates to “The Prime Minister’s Rural Electrification Program.” Launched in 2005, RGGVY aimed to provide free electricity to all households below the poverty line.
While Professor Burlig’s paper states that RGGVY achieved its goal of electrifying rural villages, leading to “substantial increases in electricity access,” the paper also reveals that RGGVY did not lead to any significant gains in positive outcomes like increased education access or household wealth. In other words, this poverty reduction policy increased electricity access, as intended, but it did not decrease poverty rates.