Essay on Infrastructure Development: A Path Towards Economic Growth

For any country aspiring to excel in growth and development, infrastructure is a vital component. India is growing rapidly in the world due to rapid economic growth that offers very high potential for investment and growth. A country’s transition from developing to a developed economy depends on infrastructure, as infrastructure supports primary (agriculture), secondary (industries) and tertiary (service) sectors. Infrastructure is of fundamental importance for industrial and agricultural growth of a nation. No country can think of development in the absence of proper infrastructure facilities. It is a sector of top priority. Infrastructure includes power generation, distribution, railways, transport, roads, shipping, communication, water supply etc. India is in need of all these and needs them fast to sustain and further accelerate the industrial growth and development. Infrastructure can often be classified into economic and social infrastructures. In the economic infrastructure, we include (a) Energy, (b) Transport System, (c) Communications, (d) Banking, Finance and Insurance and (e) Science and Technology. While social overheads consist of Education, Health and Civic amenities.

It has been mentioned in the World Development Report that “The adequacy of infrastructure helps determine one country’s success to another country’s failure in diversifying production, expanding trade, coping with population growth, reducing poverty and improving environmental conditions. World Bank is of the opinion that there is a direct and proportional relation between infrastructure and production. As a result of one per cent increase in infrastructure, there is one per cent increase in production.”

The development of infrastructure can be done on three models. First model is government funded and managed infrastructure. Here, the private sector does not set its foot as their profit viability is not so high. Second model is private funded and managed infrastructure, but also available for public usage. Here, profit viability is conspicuous therefore private sector forays into this area. The third segment is public private partnership. A public-private ownership is a commercial-legal relationship defined by the Government as a partnership between public sector entity and private sector entity where 51 per cent or more equity is with the private sector.

The Rakesh Mohan Committee Report on this subject has recommended large scale privatisation of infrastructure facilities and services. It has suggested creation of a transparent regulatory framework to set up foreign debt and equity finance in various sectors. In order to sustain the preset 7% growth, it is essential that total investment in infrastructure is increased.

This model has come to define infrastructure development since 1991 when we opened our economy for liberalisation, privatisation and globalisation. Here, technical knowhow brought by private sector and government funding allows the development of infrastructure. Considering India’s size and population we can call India an infrastructure deprived country. At present, even when India and world is growing at a relatively slower pace, but, in order to sustain the economic growth, investment in infrastructure can be hardly overstated. The FDI inflow in the construction sector has been increasing over years due to the potential of growth in the field.

Similarly, roads, rails, airports, seaport are very vital infrastructures which is used for trade and commerce in the country and also outside it. In 2017 budget, government allocated 2.56 lakh crore for developing road and rail infrastructure. Projects like Pradhan Mantri Gram Sadak Yojana, Delhi Mumbai Freight Corridor etc. is a move in the right direction. Also sea ports are being upgraded for mechanised handling of cargo and increasing the cargo handling capacity. Moreover, projects like Sagar Mala will contribute a great deal towards coastal shipping and trade. The other very vital infrastructure is the power sector. The total installed capacity of India is almost 290 GW today. India is diversifying its energy mix as green energy is the demand of today’s world. Investments in solar projects, nuclear power, and wind mills are taking place at a higher pace. Government has also opened FDI in these areas. Recently government had also launched UDAY for the financial turnaround of distribution companies. Through UDAY (Ujjwal Discom Assurance Yojana), government will convert all the outstanding loans of Discoms into state bonds which they can pay at a later date. Government has also floated schemes for rural electrification viz Pradhan Mantri Grameen Vidyutikaran Yojana. Power sector reform and infrastructure development is very vital as it propels growth in other sectors viz. agriculture, industries and service sector. Urban infrastructure for any developed state is of very great importance.

The infrastructure sector expects continued thrust from the government towards revival of investment cycle in the form of further increase in budgetary allocations in 2018 towards infrastructure sector with focus on roads, railways and urban infrastructure. Dedicated allocations for specified large infrastructure projects announced such as Bullet trains, Bharat Mala, Sagar Mala, Smart Cities, inland waterways development etc. can also be made to expedite these projects. Further, budgetary allocation towards NHAI can be increased, keeping in view the increased capital outlay on national highway development.

Due to the fast paced life in urban areas, the infrastructure should be World class. Many urban projects which have really transformed the face of city are, Delhi Metro, Lucknow Metro, Kochi Metro, Yamuna Expressway, Bandra-Worli Sea Link, Maharashtra Bus Rapid Transport System, Indira Gandhi International Airport etc. They have relieved the people of the area from regular traffic snarl up. Government has also done efforts to revamp infrastructure by schemes like Smart City, Housing For All etc. These schemes will create conditions for hassle free commutation in urban areas. Two other vital infrastructure needs of urban area is solid waste management and drinking water supply. Solid waste management has become a great menace for urban areas like Delhi, Mumbai.

In the arena of social infrastructure, government effort is required all the more. As these infrastructure are not very profit making ventures; so as a welfare state, it is the duty of government to fill these gaps. However, private investment has started to flow in health and education sector. But due to cost factors, the private social infrastructure remains beyond the reach of common people. Government should make concerted efforts to come up with more infrastructure projects and ensure their timely execution, as the projects are often marred by cost and time overruns resulting in inconvenience for the beneficiaries and depleting tax payer’s money. Government mechanisms viz. special purpose vehicle and viability gap funding is relevant for infrastructure development.

Good infrastructure raises productivity and lowers production cost. It should not only develop rapidly rather its development should precede the development of other sectors. In the words of Dr VKRV Rao, “The link between infrastructure and development is not a once for all affair. It is a continuous process; and progress in development has to be preceded, accompanied and followed by progress in infrastructure, if we are to fulfill our declared objectives of a self accelerating process of economic development.”