What is Infrastructure? How is it related to the development of the country?
The essential facilities and organizational and physical frameworks required for a community, business, or system to function are referred to as infrastructure. It serves as the cornerstone for a community, region, or country’s operations and services. Infrastructure can be utilized for communication, electricity, information, sanitary purposes, and transportation as well as to provide access to safe drinking water. Infrastructure development is essential for economic growth since it raises a region’s productivity and efficiency. Through the provision of necessary services and the promotion of social well-being, it also plays a critical role in enhancing inhabitants’ quality of life. Governments and private entities often collaborate to plan, develop, and maintain infrastructure to meet the growing needs of communities.
Recent Indian Infrastructure development
The improvement of infrastructure boosts business and entrepreneurial potential while also multiplying the influence on transportation efficiency and demand.
AAI and other airport developers have set a capital expenditure goal of about Rs. 98,000 crore (US$ 11.8 billion) for the airport sector in December 2022. This amount would be used, among other things, for new terminal construction, runway strengthening, and extension and alteration of current terminals.
India is now home to the world’s fifth-largest metro network, but it will soon surpass developed nations like South Korea and Japan to claim the third position. As of September 2022, the metro rail network covered 810 kilometers and was active in 20 cities. With a length of about 20 kilometers, the Mumbai monorail ranks third in the world’s largest routes, behind China’s 98 km and Japan’s 28 km. The Road Transport and Highways Minister officially opened 15 national highway projects in Patna and Hajipur, Bihar, in June 2022, at a total cost of Rs. 13,585 crores (US$1.7 billion). A deal to construct infrastructure in Jammu and Kashmir, including industrial parks, IT towers, multifunctional towers, logistics hubs, medical colleges, and specialty hospitals, was inked in October 2021 by the governments of Dubai and India.
Government Initiatives for Infrastructure Development
Over the past nine years, the Union Government has invested an unprecedented amount in modern infrastructure, lifting the nation to new heights. One of the main factors influencing a nation’s economic development is the caliber of its infrastructure. Infrastructure remains the primary focus for the growth of the country for the government of India.
India is building large-scale infrastructure projects, such as the Chenab Bridge in the state of Jammu and Kashmir, which is one of the world’s tallest arch railway bridges and is connected to a broad-gauge Indian Railway line at its whole length. This bridge is a testament to the extraordinary potential of Indian engineers and shows that, given the correct guidance, this talent can be used to develop creative and long-lasting infrastructure that would support India’s economic development.
To achieve the vision of a $40 trillion economy by 2047 and transition from a developing to a developed economy, infrastructure development is essential. Following COVID-19 and the global digitization of society, attention is being paid to digital and social infrastructure in addition to physical infrastructure.
Future Prospects of Infrastructure in India
According to CII predictions, India’s GDP would reach $35–40 trillion by 2047, making it one of the greatest economies in the world. In 2022, it was estimated to be around $3.5 trillion, having grown by roughly two times since 2010. The nation’s industrial output has also grown by 56% since 2010, which has aided in the country’s urbanization, which is predicted to pick up speed by 2047. The nation’s rapid economic expansion will both create and support the demand for infrastructure development in the future.
Over the next five years, India intends to invest US$ 1.4 trillion in infrastructure through the “National Infrastructure Pipeline.” Infrastructure-related activities amounted to 13% of the US$ 81.72 billion in overall foreign direct investment inflows in FY21. India will have to build 43,000 homes every day till 2022 to fulfill its goal of Housing for All. Under the Pradhan Mantri Awas Yojna initiative (PMAY-Urban), as of August 22, 2022, 122.69 lakh dwellings had been sanctioned, 103.01 lakh houses had been grounded, and 62.21 lakh houses had been completed.
During the next ten years, hundreds of new cities must be built. The demand for urban freight is expected to rise by 140% over the next ten years. In India’s growing e-commerce supply chains, 50% of all logistics costs are attributed to final-mile freight transportation in Indian cities. By 2022, India is predicted to become the third-largest building market in the world. By 2025, the Indian logistics market is projected to reach a value of US$ 320 billion. Between 2021 and 2026, it is projected that capital expenditures on transportation, urban infrastructure, and water supply will account for 11.4% of total infrastructure capex. In the tenth five-year plan, infrastructure investment made up about 5% of GDP, compared to 9% in the eleventh five-year plan. Additionally, during the 12th five-year plan, the Indian Planning Commission suggested an infrastructure investment of US$ 1 trillion, of which 40% would come from the private sector.
Some of the recent government initiatives and investments in the infrastructure sector as per the IBEF Report are as follows:
Under Budget 2023-24:
- Capital investment outlay for infrastructure is being increased by 33% to Rs.10 lakh crore (US$ 122 billion), which would be 3.3 percent of GDP and almost three times the outlay in 2019-20.
- As per the Union Budget 2023-24, a capital outlay of Rs. 2.40 lakh crore (US$ 29 billion) has been provided for the Railways, which is the highest ever outlay and about 9 times the outlay made in 2013-14.
- The Infrastructure Finance Secretariat is being established to enhance opportunities for private investment in infrastructure that will assist all stakeholders in more private investment in infrastructure, including railways, roads, urban infrastructure, and power.
- The Government has decided to continue the 50-year interest-free loan to state governments for one more year to spur investment in infrastructure and to incentivize them for complementary policy actions, with a significantly enhanced outlay of Rs. 1.3 lakh crore (US$ 16 billion).
- 100 critical transport infrastructure projects, for last and first-mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified and will be taken up on priority with the investment of Rs. 75,000 crores (US$ 9 billion), including Rs. 15,000 crores (US$ 1.8 billion) from private sources.
- 50 additional airports, heliports, water aerodromes, and advanced landing grounds will be revived to improve regional air connectivity.
- An Urban Infrastructure Development Fund (UIDF) will be established through the use of priority sector lending shortfall, which will be managed by the National Housing Bank, and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities.
- States will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF.
- To realize the vision of “Make A-I in India and Make A-I work for India”, three centers of excellence for Artificial Intelligence will be set up in top educational institutions.
- The Digital Public infrastructure for agriculture will be built as an open source, open standard, and interoperable public good that will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agri-tech industry and start-ups.
- 157 new nursing colleges will be established in co-location with the existing 157 medical colleges established since 2014.
- A National Digital Library for Children and Adolescents will be set up to facilitate the availability of quality books across geographies, languages, genres, and levels, and device-agnostic accessibility. States will be encouraged to set up physical libraries for them at panchayat and ward levels and provide infrastructure for accessing the National Digital Library resources.
- Skill India International Centres to be set up across different States to skill youth for international opportunities.
- Central Processing Centre to be set up for faster response to companies through centralized handling of various forms filed with field offices under the Companies Act.
- District Institutes of Education and Training to be developed as vibrant institutes of excellence for Teachers’ Training.
- States will be encouraged to set up a Unity Mall in their state capital or most prominent tourism center or the financial capital for the promotion and sale of their ODOPs (one district, one product), GI products, and other handicraft products, and for providing space for such products of all other states.
- Since 2016-17, the budget for the Pradhan Mantri Awas Yojana, the flagship housing scheme of the government, has increased 280% from Rs. 20,936 crore (US$ 2.5 billion) in the revised estimates of 2016-17 to Rs. 79,590 crore (US$ 9.6 billion) in the latest 2023-24 budget.
- The Awas Yojana budget estimate for 2023-’24 constitutes an allocation of Rs. 25,103 crore (US$ 3 billion) to Pradhan Mantri Awas Yojana-Urban and Rs. 54,487 crore (US$ 6.5 billion) to Pradhan Mantri Awas Yojana-Gramin.
Growth drivers of the sector
Government initiatives – Through several initiatives, including the PM Gati Shakti (multi-modal logistics development), Bharatmala Project (road development), Sagarmala Project (port-led development), Smart Cities Mission, AMRUT (urban infrastructure), and Pradhan Mantri Awas Yojana (housing for all), the Indian government has been actively promoting infrastructure development. The expansion of infrastructure is strongly encouraged by these programs.
Private sector investment – Infrastructure projects are costly and can take a long time to complete. The length of time it takes for a project to be finished and begin making money deters the private sector from investing in the industry. The administration is establishing a conducive working environment to solve this. For example, the government might intend to establish a facility for credit guarantees, which would enhance the creditworthiness of PPP projects and facilitate the acquisition of long-term financing. Large-scale infrastructure projects are also financed by private parties with the aid of Infrastructure Investment Trusts (InvITs), which raise money from institutional and retail investors without taking on debt. Tax advantages that are not available to businesses are also received by InvITs.
Foreign direct investment – The Foreign Direct Investment (FDI) policy of India permits 100% FDI in several areas, such as industrial parks, hotels, highways, residential and commercial real estate, and education. The government is thinking about allowing limited liability partnerships (LLPs) to fund townships, hotels, hospitals, and highways to further encourage foreign direct investment. By shortening lock-in times and enhancing investor facilitation, this action may draw in more overseas investors.
