Discuss the impact of infrastructural development on Economy

Discuss the impact of infrastructural development on the economy of a country - What is the impact of infrastructure on economic growth?

While infrastructure development can provide a boost to the economy, the primary step is to identify the issues associated with weak infrastructure in India. Rural road networks provide insufficient access to rural areas. Increased road connectivity should promote economic growth while reducing poverty.

Discuss the impact of infrastructural development on the economy of a country

  • Infrastructure is the spinal cord of a nation’s progress.
  • It is the main engine by which economic progress starts.
  • For the economic and industrial development of a nation, luxury infrastructural development is a basic and prime need.
  • During the 11th five-year plan (2007-2012) estimated investment requirement on infrastructure is near to Rs. 14, 50, 000 crore.
  • Well-developed infrastructural facilities are the key to the development of any nation.
  • Most of the infrastructural projects are relating to the construction of transportation systems and heavy construction.
  • The infrastructural facilities mainly transport, power, communication, water resources, banking, Science and Technology create an environment in which industries and businesses can grow.
  • Due to the basic facilities which any industry needs are provided by infrastructure hence industrial growth is accelerated.
  • In India due to recent development in the infrastructural sector, the country has progressed well.
  • Per capita income and Gross domestic product are the economic measures for the assessment of development.
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What is the impact of infrastructure on economic growth?

Infrastructure is the base on which economic growth is built upon. Roads, water supply, mass transportation, airports and other utilities all constitute infrastructure.

The infrastructure consists of all supporting services which are necessary for the growth in the directly productive sectors(agriculture and industry). It includes within its domain provisions for healthcare and education, transportation, communication, power and water supply, irrigation facilities etc.

Infrastructure has a two-way connection with economic growth. The development of infrastructural facilities stimulates economic growth. This happens in the following ways:

  • Infrastructural facilities such as power, water and transport etc. are essential for the growth of directly productive sectors of agriculture and industry. Insufficient availability of the former results in the sub-optimal utilization of assets in the latter.
  • Infrastructure facility of transport enhances productivity significantly.
  • Infrastructure is practically the key to modern technology in almost all sectors.
  • Empirically, a close relationship is observed between the development of infrastructure facilities and economic growth. 1% growth in infrastructural stock brings about 1% growth in per capita GDP.
  • It has been shown by studies that around 6.5% of the total value added is contributed by the Infrastructural sector in low-income countries. This proportion increases to 9% in middle-income countries, and 11% in high-income countries.
  • Again, economic growth brings about a change in infrastructure.
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