Infrastructure and Economic Development in India

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Infrastructure Development in India

One of the key drivers for the Indian economy is the Infrastructure Sector.  To create world-class infrastructure in the country it is crucial to look into India's overall development in respect to how the government helps in the growth of this sector and the way in which it ensures time-bound creation. This infrastructure includes bridges, dams, roads, power and urban infrastructure development. According to World Banks, Logistics Performance Index India ranked 44 out of all the countries in the world. In 2019, it ranked 2nd in the Agility Emerging Markets Logistics Index.

What is Infrastructure Development?

Infrastructure provides the most basic facilities that help serve different economic activities and thereby help in the facilitation of the growth of the country, development of the country, education, communication, transport, banking and insurance, health, technology. The example just provided are some of the basic needs that are required to fuel the growth of the economy. For the economy, these do not produce services or goods for the economy but help in inducing the production of the industry, agriculture and trade by creating an external economy. The best examples of economic infrastructure are the railway line or the national highway. They help induce external investment and generate economies.

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Infrastructure and Development

For the basic development of the most basic goods in the economy, it is required as it does not help in the direct production of any goods or services but it does help in the facilitation of the various goods and services in different sectors of the economy ie. the primary, secondary and tertiary sectors. It is a fact that the level of economic development is dependent on the infrastructure development of the country. If we are to look at the most developed countries in the world it is easily seen that there is a tremendous amount of growth in terms of economic and social infrastructure.

With communication and transport, there has been revolutionary progress in these countries.  The financial sector in these countries is also doing well because of the best planned and organized banking and insurance. In terms of technology and science, there is a tremendous amount of progress as well. But in counties as India, we do not have such high standards of qualitative infrastructure and because of this, the level of economic development is slow and low. 

Infrastructure in Indian Economy 

To facilitate production and investment in the economy we need the best infrastructure in terms of quality and also should be sufficient. The bigger infrastructure facilities pave the way for bigger investments in that sector. But the problem with underdeveloped countries is the shortage of these facilities because of less economic development. The Indian economy was really behind by the time it got its independence with respect to the rest of the world.  So once we got independent the first priority for the planners of the country was infrastructure development. 

Out of the total planned expenditure about 50 percent was devoted to infrastructure. In the first plan, thirteen percent was spent on power, ten percent on flood and irrigation control and twenty-seven percent was given to transport and communication.  Because of all the infrastructure development, we have done since independence we have caught up with the rest of the world and the country has become one of the most promising countries in terms of development and growth.

Public-Private Partnership and Infrastructure

As the government focuses on the vitality of infrastructure in terms of growth and development it is at the same time cutting down the investment in the infrastructure sector. In recent years, the Public-private partnership is gaining a lot of momentum and an economic survey found the PPP projects to be highly impactful for the country. The survey talks about how India is getting a lot of foreign direct investments and also it attracts a lot of private capital to take on a lot of infrastructure projects. The PPP has also found ways to cut down on irrelevant expenditures and make infrastructure development more efficient.

The Public-Private Partnerships can help in sharing various risks, cost recovery, accountability and also help in infrastructure management. The various steps the government has taken over the years are as follows- 

  1. The government has enhanced the tax rebate on debentures and shares in order to have a smoother flow in terms of savings in infrastructure investments. 

  2. The national highway of India has a corpus of over 200 crores which helps in the direct investment from international markets.

  3. The government in 1997 set up IDFC (Infrastructure Development Finance Company) which has an authorized capital of five thousand crores.

  4. Companies get tax holidays to help maintain and develop various infrastructure facilities. These facilities include new airports, railway projects, bridges, roads and water supply. 

  5. There is also a tax exemption on interest, dividend and long term capital gains which are earned by companies.

FAQ (Frequently Asked Questions)

Q1. What are Some of the Benefits of PPP in Infrastructure and Development in the Country?

Ans. Capital can be leveraged in order to get larger private investments internationally and domestically, this also helps companies to get better infrastructure in place for the country. Within the private sector, a lot of methods are introduced to help save cost and be far more efficient by which more infrastructure can be put in the county. There are tax exemptions on various long term capital gains for companies and also on interest and dividend.

Q2. What is the Definition of Infrastructure and What are its Economic Components?

Ans. Infrastructure development helps with various public works in a country and this includes roads, public buildings and different utility lines. It is the substructure that is found underlying the network or foundation for providing services or goods for the country. It is the very basic services and facilities that can help the growth in the economy of the nation. The economic components are energy, transport and communication.