Infrastructure Development and Economic Growth

Posted By:Infrabazaar

India is one of the fastest growing countries in the world after China and it needs to maintain growth momentum in a sustainable manner to improve the overall standard of living and reduce poverty. Sustaining economic growth in India depends on developing quality infrastructure network all over the country. The policy makers in India have reiterated time and again that providing business friendly environment would drive growth. 

Infrastructure development is one of the major factors contributing to overall economic development in many ways such as:-

Direct Investment on infrastructure creates production facilities and stimulates economic activities.

It reduces transaction costs and trade costs improving competitiveness.

It provides employment opportunities and improves social infrastructure

In contrast lack of infrastructure creates bottle necks for sustainable growth and poverty reduction.

Infrastructure investment has two types of effects:-

It has demand creation effect in other economic activities which is flow impact.

It has stock impact which has better which makes better availability of services and improves productivity of private sector and economy as a whole.

For India to maintain the growth momentum it is mandatory to strengthen transportation infrastructure facilities like, roads, railways, ports and airport connecting the domestic economy effectively and improving overall competitiveness, thereby lowering trade and transaction cost.

Infrastructure demands strong planning, coordination, decentralization, private participation and commercialization of service providers rather than a top down approach which is generally followed in India. Some of the major issues for infrastructure development in India include Public-Private Partnerships, Budgetary Allocation, Infrastructure Financing, Land Acquisition, Center State Coordination Etc.

Infrastructure growth contributes to economic growth by stimulating economic activity, productivity and simultaneously enhancing the quality of life. Relationship between Infrastructure development and Economic Growth is directly proportional in Indian context. Better rural infrastructure and electricity directly impacts agricultural productivity. Better transport infrastructure means reduction in transportation cost and increase in productivity.  Reduction in production costs and manufacturing costs happens due to better infrastructure. It helps in significant growth rates and poverty reduction.

It can be concluded that transport, electricity, water and gas supply and better communication facilities which means a wholesome Infrastructure have a significant and positive effect on Economic growth.