Sorry for late entry.
At number 1 it will be most lean and at 5 it will be most rich.
Actually this setting doesn't affects the avg 0ver entire range of speedw/race.
All Desi carbs have three primary circuits to meter feul supply.
Needle controls major portion from 60-100%of throttle range.
It must be set so that it gives perfect burn of mixture.
To test each range Clean the plug and find some good long free patch of road. Hit full speed in top gear for few seconds 5-10 seconds at most then immediately turn off bike and press clutch in and release the race. Then Chek reading on plug.
You will find a sweet spot after few tries.
Also remember if you are going to replace needle replace it on pairs with its needle jet in which the needle passes.
Mostly the center reading is fine but if it's old bike thenthe needle jet gets widened so lower the clip in needle say set at 2 position. At high altitudes like murree set 8t to 1/2