Cricket World Cup and Indian economy

After some folks calculated the cost of 2007 cricket world cup to Britain’s economy (US $521 million), I thought why not put up a similar number for the Indian economy as well.

Like all ‘good’ software engineers do, I looked around for a copy-paste way to start :) and googled for similar material. Brazil and soccer world cup would be a nice parallel, isn’t it? Does Brazil’s economy take a hit during the soccer world cup months? Going by it’s title, this Goldman Sachs paper (World Cup and economics 2006) looked promising, but sadly enough, it has the opposite correlations: performance as a function of GDP.

I don’t understand economics much (as confessed earlier), but this exercise should be more of assumptions than economics. Anyways, help correct all this maths and we can work up a good estimate.

Facts (few) and assumptions (many):

India’s GDP, as per 2006 estimate, in was around $4 trillion in PPP terms. Now for a whole lot of assumptions.

Leave old folks, children and a lot of women out to assume that around half of our population (= half a billion) is productive (workforce) and contributes to the GDP. So, each productive worker contributes $8000 to our GDP (4 trillion / half a billion). Make that about $25 a day (assume 6 working days).

India will play at least 10 games at the WC. Add possible semi final, and the time Indian fans will spend on other team’s games to grow the number of ‘impact days’ to 15.

Now, time for 2 most critical (or controversial or absurd, you pick) assumptions.

  1. On a game day, a worker’s productivity drops by a third. Interest during the game, excitement the previous day, analysis of the game the next day, all included – shave 33% off a worker’s output.
  2. 60% of our workforce are cricket fans (half a billion x 60% = 300 million)

We can do that big number now, can’t we? 60% of workforce will produce 33% less on 15 days during March and April. Impact per productive fan is about (33% of $25) $8 a day.

The number :

So, the total hit our economy will take should be: 15 x 8 x 300 million = $36 billion.

Yes, there is a whole lot of assumptions and layman economics here. Sound off and we shall make corrections.

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14 Responses

  1. Not bad for a start. But one huge over-estimation, imo. 60% of our workforce or 300 million being cricket fans. Most rural folks don’t care for cricket. They may watch it casually, but they certainly won’t lose sleep or work over it. Same with the urban poor. A construction worker can’t afford to watch the game till 3am and not turn up for work the next day. He won’t have anything to eat. It is only the urban middle and upper middle classes who are passionate about the game. It is difficult to put a number on it, but I think we can take a cable home as a proxy for interest in the game. There are 60 million cable homes in India and a typical family has only one bread winner (and even if the wife is working, women are generally not crazy about the game anyway). That leaves 60 million as the upper bound for number of workers who are cricket fans. But not all of them will be crazy about the game to watch it late in the night or waste work hours talking about it. I would say, probably half of them at best.

    And then, India plays only 7 meaningful matches. Or 9, if you count semis and finals. Matches not involving India – it is more the students with plenty of time on their hands or the really miniscule minority of workers who are interested in those games. I don’t think the number of days will go as high as 15. 12 is probably a more realistic figure.

    12 * 8 * 30 million = $3 billion *ppp* dollars. Or $750 million USD.

  2. Oh, not to forget that 5 of those potential 9 matches involving India are over the weekend, so there is no work day the next day to waste talking about the game. So, make it 7*8*30million = $1.5 billion PPP dollars or $350 million USD. On top of that when you consider the productivity surge that people get when India wins a match, the generally good effects of family and friends spending time together watching the match and ofcourse the spending boom (consider the number of LCD tvs that will fly off the shelf), world cup may be a net positive to the economy.

  3. Never understood economics & also that D&L method for rain-hit matches. So no comments :|

  4. economist assumtion is simple….
    economists simply ignore the negative impact by saying that the person was underemployed.. or he/she rescheduled this vacation/break to the match timings… so the negative impact is discounted off.
    1) people will buy new TV sets, sofas and all equipment/consumer goods required to watch matches
    2) sports bar, pubs etc will be doing extra business during match hours.
    3) media/advertizing agencies will do brisk business.
    4) hotels and travel industry will witness a boom etc etc.

  5. Oh yes, pegasus, very true. All that is the economic plus. I was trying only the minus part here. Estimating the plus part seems a lot harder.

  6. Might not be very accurate, but sure is a nice analysis :-)

  7. pranav:

    maybe mohan and you can expand your analyses in this direction as well …

    prashanth:

    i never understood much of economics myself either (i did not even comment on pranav’s budget post!).

    – s.b.

  8. @Somebody:

    irrespective of where it is held, world cup is always net forex outflow from India. Because ICC owns the rights for the tournament no matter where it is held. Money goes from Indian companies to ICC. Same is true when India goes on a tour. Money goes from Indian companies to host board. However there is no corresponding forex inflow when we host another team, because the market outside of India is minimal compared to Indian market. Overall, cricket is a huge forex drain for the country. To the tune of $300 million per year (around $150 million per year in bilateral tours that the team embarks and another $150 million per year (averaged) in ICC tournaments like Champions Trophy and World Cup).

  9. Good point Mohan. I don’t data on the lines of what you quote above, but I too feel that international cricket is like willfully gifting a lot of money out to other countries. We can keep all of that internal, and generate a lot more entertainment and money churn by building a strong and popular domestic league.

    Reply to your earlier comment Mohan :

    – what is this productivity surge after India winning match :) ? I never experienced that myself!

    – 60 mill cable home isn’t enough, reach is bigger through DD. And true, crazy fans are mostly urban folks, but then they ‘produce’ more than the avg workforce. Summary – your number – 30 mil “impacted’ fans is a bit low, let us negotiate down to 100 mil, shall we!?

    Anyways. Fun and curiosity was the purpose for all this maths and economics. What is the problem when we all truly love the game :)

  10. Silkboard,

    productivity surge – that’s what ToI had reported the day before I posted that. It was on the top of my mind, so I wrote that. Not that I believe it myself :)

    bigger reach through DD – yes. Number of total television homes (C&S+DD) is around 110 million. But most of those DD homes will probably be in rural area. But you are right, cricket audience per capita GDP is higher than average, so 30mil is probably a bit low. Let’s agree on 60 million :-)

    As for the data for how much of a drain cricket is annually, this is how I calculated:

    – Nimbus-DD deal is worth $150 million per year for India’s home series. Since India plays as many matches away as at home per year, it follows that the away matches must also be worth $150 million per year to those other boards. In fact, it could be higher, because when we tour places like England and South Africa timing is ideal for prime time TV viewing, so those tours should be actually worth higher than home series. Other places like Australia, Pakistan, Sri Lanka are anyway similar to home series.

    – For ICC tournaments, ICC’s recent deal with ESPN Star for next 7 years or so was worth 1.5 billion dollars. Around 70% of that is going to come from India. So you have another $150 million per year going from Indian economy to ICC.

  11. Oddly enough none of these calculations appear to have factored in the unthinkable: an early exit for India, which is looking more likely after the loss to Bangladesh. Pak are on their way home, perhaps we could join them as well for a one-off series :)

  12. hehe, good one Mojo. Since the talk here is pure economics, one would suspect the biggest loser out of this early exit scenario – Sony Max – will have to ‘pursuade’ Sri Lanka to lose a game or two!

  13. “irrespective of where it is held, world cup is always net forex outflow from India. Because ICC owns the rights for the tournament no matter where it is held. Money goes from Indian companies to ICC. Same is true when India goes on a tour. Money goes from Indian companies to host board. However there is no corresponding forex inflow when we host another team, because the market outside of India is minimal compared to Indian market. Overall, cricket is a huge forex drain for the country. To the tune of $300 million per year (around $150 million per year in bilateral tours that the team embarks and another $150 million per year (averaged) in ICC tournaments like Champions Trophy and World Cup).”

    that is what i suspected, which is why i have always felt that bcci should strong arm icc more than it currently does.

    – s.b.

  14. s.b., the best way to strong arm ICC without getting yourself called a bully will be to create a strong domestic platform for local advertisers money. Then, cut down on international ODIs, slowly, say from 40-45 to 15-20 an year. Keep your “stars” confined in the country tied to a nice league for those extra 25-30 days you get. That should get the masses to watch some local action, and you will get to churn all those advertisers’ money within the country.

    Playing fewer international stuff an year will make each of those more meaningful. Good domestic league will make our side competitive enough to make sure those matches will be fun. World cup will be more fun too, it currently is not because of Champions Trophy and those triangular tournaments.

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