Infrastructure and Economic Development

Infrastructure and Economic Development

In this article, we talk about how infrastructure and economic development in India has evolved and grown in past years. We will also look at the role of infrastructure in economic growth in India.

Infrastructure and economic development are responsible for the overall development of any country, and therefore, several policies have been initiated by the government of India to ensure growth. Infrastructure and economic development always go hand-in-hand. This article will see how the infrastructure sector has evolved through the years to support India’s economic growth. The establishment of the public-private partnership in the infrastructure sector has also been elaborated on in the article. The steps taken by the government for infrastructure and economic development have also been explained in greater detail for better understanding.   

Infrastructure and Economic Development

The economic development and the standard of living of a country depend on its agriculture and industrial development. Infrastructure and economic growth are connected because machinery, banking, and insurance facilities are crucial for agriculture to develop. Equipment, workforce, communication facilities, and transport services are other primary factors that aid this growth. This is where the role of infrastructure is essential, as all these factors are a part of the infrastructure. Developing infrastructure also helps in generating employment opportunities. It is also responsible for the research and development in other facilities. Infrastructure indirectly also pushes social development like the improvement of backward classes through job opportunities, and it also helps in eradicating poverty and enhancing globalisation.

There are mainly six ways in which infrastructure industries are measured,i.e, crude oil, petroleum, steel, cement, electricity, and coal. The performance or the development of infrastructure is a direct reflection of the economy’s performance. Inadequate infrastructural development hinders the objective of inclusive growth and acts as a significant barrier to foreign direct investments.  

Evolution of Infrastructure and Economic Development in India

For many years, the infrastructure of India was mainly looked after by the government of India. It was only the government’s responsibility to provide economic development due to substantial capital investments, high risks, and low returns. The demand for infrastructure could never match the supply and kept increasing over the years. The government later realised that infrastructure and economic development in India would gain more momentum if the public and private sectors came together in partnership. 

Public-Private Partnership and Infrastructure

Many private companies have gained contracts for infrastructural development as the government is not able to cope with the demand. In recent years, this public-private partnership has picked momentum. Some of the projects on which they are working will be significant for the infrastructural and economic development of India.

This has also led to a lot of foreign investment. It is also attracting private investors to take on infrastructure projects. The private-public partnership has also cut down irrelevant expenditures and reduced issues like cost recovery, risks involved, and accountability.

Steps taken by Government of India

To ensure that the flow of savings and infrastructural growth is well oriented, the government has increased the tax rebates on debentures and shares. 

It has taken steps to increase the direct investment from the international markets to ensure that they get more capital to improve infrastructure and economic development. 

The government uses the purchasing power parity or PPP model, which enables the public sector to benefit from the private sector’s technical expertise, experience, and efficiency.

PPP also enables risk reductions in the public sector as they can be transferred to the private sector.

Due to the public sector and private sector’s partnership, the private sector was able to invest 81% in ports, 64% in airports, 20% in roads and buildings, 5% in railways, and around 80% in telecom sectors.

The government has taken some projects to promote the public-private partnership in the infrastructure development in India, like, Viability gap funding for PPP projects, support for project development of PPP, a national PPP capacity building program, and also many training programs have been introduced to train the public functionaries who deal with PPP in their sector.


We can conclude that infrastructure is the backbone of all the other sectors needed for the development of our country. Infrastructure accelerates the process of growth and also helps in generating employment opportunities. We have also tried to understand how the public-private partnership has been successful in developing new infrastructure in India and the benefits of the PPP model. It should be noted that the PPP is not a replacement for the traditional public procurement but should only be used where the strength from both the sectors could be used to balance and make a win-win situation for both the sectors.