Indian Economic Development:

An Overview UNIT 5 PHYSICAL AND SOCIAL

INFRASTRUCTURE

Structure
5.0 Objectives
5.1 Infrastructure in India
5.1.1 Meaning and Significance
5.1.2 Nature of Infrastructure
5.1.3 Types of Infrastructure
5.1.4 Infrastructure and Economic Growth
5.1.5 Role of Public Private Partnership in Infrastructure
5.1.6 Budget Allocations for Infrastructure Sector
5.1.7 Social and Physical Infrastructure
5.2 Privatisation and Commercialisation of Infrastructure
5.2.1 Need for Privatisation and Commercialisation
5.2.2 Prerequisites for Private Investment
5.3 Physical Infrastructure: Growth and Policy Issues
5.3.1 Transport
5.3.1.1 Road
5.3.1.2 Railways
5.3.1.3 Shipping and Ports
5.3.1.4 Aviation
5.3.2 Telecommunications
5.3.3 Power
5.3.4 Banking
5.3.5 Housing and Urban Infrastructure
5.4 Social Infrastructure: Growth and Policy Issues
5.4.1 Education
5.4.2 Health
5.5 Infrastructure: Challenges and Way Ahead
5.6 Let Us Sum Up
5.7 Key Words
5.8 References
5.9 Answers or Hints to Check Your Progress Exercises

5.0 OBJECTIVES
After reading this unit, you will be able to:
state the need for infrastructural development in India;
distinguish between physical and social infrastructure sector;
explain why both physical and social infrastructure are crucial for India’s
growth;
identify the issues requiring policy attention arising out of India’s economic
108 growth; and
 pinpoint the issues crucial in infrastructure policy in the Indian economy. Physical and Social
Infrastructure

5.1 INFRASTRUCTURE IN INDIA

In Economic literature, infrastructure is popular by the name “Overhead Capital”
or “Social Overhead Capital”. The famous economist A.O Hirschman stated that
Social Overhead capital is the “basic services without which primary, secondary
and tertiary productive activities cannot function”. Importance of infrastructure
in facilitating economic and social activity cannot be under-emphasised.
Sustainable Development Goal (SDG) 9 aims to “Develop quality, reliable,
sustainable and resilient infrastructure, including regional and trans-border
infrastructure, to support economic development and human well-being, with a
focus on affordable and equitable access for all”.

This unit focuses on both the physical and social infrastructure sector; its
importance in the economic growth, recent trends and government policies
towards infrastructural development and challenges faced by the sector.

5.1.1 Meaning and Significance

Infrastructure means those basic services and support systems that facilitate
different economic activities, thereby helping in the development of a country.
Infrastructure comprises of activities such as (i) transport, (ii) communications,
(iii) energy, (iv) aspects related to economic activity that contribute to increase
in productivity of natural resources, such as irrigation, drainage, afforestation,
etc., (vi) science and technology, (vii) information system, (viii) finance and
banking, (ix) civic amenities like piped water supply, sanitation and sewerage,
solid waste collection and disposal, and piped gas, and (x) human resource services
like education and health. Core Infrastructure incorporates all the main types of
infrastructure, for instance, roads, highways, railways, public transportation,
water, and gas supply, etc. Core assets provide essential services and have
monopolistic characteristics. It is useful to view infrastructure as physical
infrastructure like roads or bridges and the infrastructure services like
transportation, in this case. Most infrastructure services and part of physical
infrastructure are non-tradable, and therefore their availability cannot be readily
augmented through imports. They need to be domestically produced. Investors
seeking to invest in core infrastructure look for five different characteristics:
income, low volatility of returns, diversification, inflation protection, and long-
term liability matching.

5.1.2 Nature of Infrastructure

The infrastructure sector has certain peculiarities that help us to distinguish this
sector from other sectors of the economy. Among these, the more important
distinguishing features can be identified as follows:
i) Public Goods: Most of the physical infrastructure services have some
elements of public good in them. These services are available to the public;
the consumers may be charged for these services or the same may be supplied
free. But even when they are supplied against a price, it is not always possible
to exclude those consumers who chose not to pay for them.
ii) Externalities: The social benefit of the infrastructure services far exceeds
the cost involved in their generation. This, in turn, creates problems in pricing 109
Indian Economic Development: of these services. It makes it difficult to price them in order to recover the
An Overview
cost fully.
iii) Monopolies: Due to the inherent nature of infrastructure services, it is difficult
for more than one supplier to exist in one location. It thus creates the
possibility for monopolies and their regulation.
iv) Public Sector Domination: The existence of externalities particularly in the
field of social welfare has resulted in a dominant position by public sector
in production and supply of infrastructure services.
v) Lumpy Investment: Infrastructure prospects, more generally, require lump
sum investment, i.e., any expenditure on a part of the project is not useful
until the whole project is ready for operations. A half-way road or a rail line
are of no use. Similarly, investment in energy is useful only when the whole
system of generation, distribution and its reach to the ultimate consumer is
ready.
vi) Indivisibilities: Lump-sum investment, in turn, is the result of indivisibilities,
a characteristic feature of most infrastructure projects. One cannot divide
and sub-divide such projects in small parts and activate them. These are
indivisible.
Infrastructural facilities are very necessary and vital for the smooth functioning
of the economy. According to Dr V. K. R. V. Rao, “The link between infrastructure
and development is not a once for all affair. It is a continuous process and progress
in development has to be preceded, accompanied and followed by progress in
infrastructure; if we are to fulfil our declared objectives of a self-accelerating
process of economic development”.

5.1.3 Types of Infrastructure

Infrastructure can be put into several different types including:
Soft infrastructure: These types of infrastructure make up institutions that
help maintain the economy. These usually require human capital and help
deliver certain services to the population. Examples include the healthcare
system, financial institutions, governmental systems, law enforcement, and
education systems. Soft infrastructure refers to all the institutions that
maintain the economic, health, social, and cultural standards of a
country. This includes educational programmes, official statistics,
parks and recreational facilities, law enforcement agencies, and emergency
services.
Hard Infrastructure: These make up the physical systems necessary to
run a modern, industrialised nation. Examples include roads, highways,
bridges, as well as the capital/assets needed to make them operational (transit
buses, vehicles, oil rigs/refineries).  The assets constituting the hard
infrastructure support multiple services that are important intermediaries in
the production process. Thus, roads support transportation services that are
important to move inputs and outputs of a production process.
Critical Infrastructure: These are assets defined by a government as being
essential to the functioning of a society and economy, such as facilities for
shelter and heating, telecommunication, public health, agriculture, or civic
amenities, etc.
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5.1.4 Infrastructure and Economic Growth Physical and Social
Infrastructure

Infrastructural facilities are vital for the smooth functioning of the economy.
They are like wheels of development without which the economy will not be
able to function properly. Provision of adequate infrastructure, both in terms of
quantity and quality, is essential for sustenance of economic growth. They
contribute to improvement in factor productivity and by providing amenities
that enhance the quality of life. The role of infrastructure development in economic
growth has been well recognised in the literature. Discussed below are some of
the most critical significance of economic infrastructure and its impact on the
economy.

1) Productivity and Growth: Better quantity and quality of infrastructure can

directly raise the productivity of human and physical capital and hence
growth (e.g. by providing access, roads can: (i) improve education and
markets for farmers’ outputs and others by cutting costs, (ii) facilitate private
investment, (iii) improve jobs and income levels for many). Studies reveal
that 1 per cent growth in the stock of infrastructure often associates with
1 per cent growth in per capita GDP.

2) Contributes to Domestic Market Development: Infrastructural development

also contributes to domestic market development. Rural roads in the
developing countries have a major effect in improving marketing
opportunities and reducing transaction costs. The marketing of agricultural
commodities can account for 25-60 per cent of final prices of food stuffs in
developing countries. About half of the marketing costs are attributable to
transport. Thus, proper infrastructure can reduce the cost of marketing which
in turn contributes to domestic market development.

3) Infrastructure mobilises Savings (Domestic and Foreign). Infrastructure

development typically involves high levels of upfront financial investment,
given the heavy capital expenditure required during the construction stage.
Thus, mobilising savings for infrastructure development becomes
indispensable. In the globalised era infrastructure facilities plays an important
role in attracting foreign capital. Foreign direct investment as well as portfolio
investment flows to those countries where adequate infrastructure facilities
are available.

4) Infrastructure Generates Employment Opportunities: Infrastructure is a base

for larger investment, development of industry and agriculture which in
turn creates more employment opportunities. Infrastructure improves
mobility, productivity and efficiency of labour.

5) Infrastructure and Social Development: Infrastructure increases the

employment opportunities which increase the income level of the people
further enhancing the standard of living of the people. Thus, infrastructure
development will change the total outlook of the society and will lead to
social development.

6) Assists to Reduce Poverty: Creation of infrastructure helps to reduce poverty

by improving the quality of life. Access to clean water and sanitation has
direct consumption benefits in reducing mortality and morbidity that
increases the productive capacity of the poor. Access to transport can
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Indian Economic Development: contribute to higher and more stable incomes enabling the poor to manage
An Overview
risk. Transport infrastructure has been found to expand opportunities for
non-farm employment in rural areas. Improved rural transport can also ease
the introduction of improved farming practices by lowering the costs of
modern inputs.
7) Promotes Social Change: Infrastructural facilities also act as an instrument
of social change. Development of industries, transport facilities and education
changes the outlook of people. Apart from these, even science, technology
and growth of towns and cities will lead to a changed economic outlook.
8) Infrastructure and National Defence: Infrastructure development in terms
of proper transport and communication facilities, adequate facilities for
research and development, proper military schools etc. increase the strength
of the nation from defence perspective.

5.1.5 Role of Public Private Partnership in Infrastructure

Infrastructure may be owned and managed by governments or by private
companies, such as a public utility or railway companies. Traditionally most
roads, major airports and other ports, water distribution systems, and sewage
networks have been publicly owned, but this is changing as now one finds many
energy and telecommunications networks are privately owned, so are airports,
roads and civic infrastructure. Government-owned and operated infrastructure
may be developed and operated in the private sector or in public-private
partnerships. Besides supplementing the public resources, public-private
partnerships (PPPs) enable the public sector to benefit from private sector technical
expertise, experience and efficiency, and transfer project-related risks to the private
sector. In infrastructure, PPPs have helped addressing financial gaps. However,
the actual performance of infrastructure sector PPPs has been mixed. While a
few sectors like roads and highways and airports have been able to attract
significant private investments, most others like ports, water treatment and
recycling, health and education have seen limited traction. Over the last decade,
the share of private investments in the sector fell from 37 per cent in 2008 to
about 25 per cent in 2018. A number of important steps have been initiated by
the government to provide a boost to infrastructure PPPs over last few years.

One of the most significant has been the setting up of the National Investment
and Infrastructure Fund (NIIF), with the government contributing around
Rs. 20,000 crore. A number of policy-related measures aimed at improving
liquidity in infrastructure investments have also been taken such as announcement
of Infrastructure Investment Trust guidelines by SEBI in September 2015,
promulgation of the Insolvency and Bankruptcy Code, 2016 and the November,
2018 directive by SEBI to large corporates to fund at least 25 per cent of their
borrowings through the corporate bond market with effect from Financial Year
(FY) 19-20.

While these initiatives are steps in the right direction, there are a few other areas
which need to be addressed on a priority basis given the global experience in
public private partnerships. Firstly, there is a need to consolidate and update the
existing PPP guidelines based on the experience gained across individual sectors
over the last few years as well as best practices in other countries. Secondly,
need to formulate an enabling framework to renegotiate concession
112 agreements. Finally, there is an urgent need for a dispute-resolution process for
Public Private Partnership (PPP) arrangements, as long-pending disputes have Physical and Social
Infrastructure
significantly adverse financial impact and act as a deterrent for private partners.

5.1.6 Budget Allocations for Infrastructure Sector

The social and economic transformation of society depends on availability of
inclusive and sustainable infrastructure amenities to the people and the ability of
the economy to address its infrastructure bottlenecks. In the past decade (FY
2008-17), India invested about $1.1 trillion on infrastructure. The challenge is to
step-up annual infrastructure investment so that lack of infrastructure does not
become a binding constraint on the growth of the Indian economy. In order to
reach the GDP target of $5 trillion by 2024-25, India needs to spend about $1.4
trillion (Rs. 100 lakh crore) over these years on infrastructure, including social
and economic infrastructure projects. To achieve this objective, a Task Force
was constituted to draw up the National Infrastructure Pipeline (NIP) for each of
the years from FY 2019-20 to FY 2024-25. NIP is set to enable a forward outlook
on infrastructure projects which will create jobs, improve ease of living, and
provide equitable access to infrastructure for all, thereby making growth more
inclusive. As per the detailed reports of the task force, total project capital
expenditure in infrastructure sectors in India during the fiscals 2020 to 2025 is
projected at over Rs. 102 lakh crore, around 70 per cent of this is amounted by
sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%).

5.1.7 Social and Physical Infrastructure

A country’s level of human and economic development is closely related to its
levels of achievement in physical and social infrastructure. While physical
infrastructure is an important determinant of domestic production, good social
infrastructure is vital for human development as well as economic progress
through better educated, better skilled, and healthier citizens, or citizens with
better human capabilities.
Social infrastructure
Social infrastructure refer to basic services such as health, education, skill
formation and training that contribute to human resource development and its
quality. It also includes sanitation, drinking water, housing, sewerage, etc. Social
infrastructures are also termed as social overheads. These social overheads
indirectly support the economic systems as they contribute to productivity
improvements. Besides meeting some social objectives, the social infrastructure
supports growth in the long run. For example, consuming education services
does not directly affect economic activities like production and distribution of
goods, but indirectly helps in the economic development of the country by
producing the skill and knowledge sets in the form of scientists, technologists
and engineers, who contribute to economic activity. Social infrastructure
enhances social well-being and furthers economic growth by providing basic
services and facilities which allow businesses to develop and flourish.
Trends in Social Sector Expenditure
As per Economic Survey 2020-21, the expenditure on social services (education,
health and other social sectors) by the Centre and States combined as a proportion
of GDP increased from 6.2 to 8.8 per cent during the period 2014-15 to 2020-21
(BE). This increase was witnessed across all social sectors. For education, it
increased from 2.8 per cent in 2014-15 to 3.5 per cent and for health, from 1.2
per cent to 1.5 per cent during the same period. Refer Table 5.1. 113
Indian Economic Development: Table 5.1: Trends in Social Service Sector Expenditure by the Centre and States
An Overview combined (as a % to GDP)

Item 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

RE BE
Expenditure 6.2 6.6 6.8 6.7 6.7 7.5 8.8
on Social
Services of
which:
i) Education 2.8 2.8 2.8 2.8 2.8 3.0 3.5
ii) Health 1.2 1.3 1.4 1.4 1.4 1.5 1.8
iii) Others 2.1 2.5 2.6 2.4 2.6 3.0 3.5
Source: Economic Survey 2020-21
Note: 1. Social services include, education, sports, art and culture; medical and public health,
family welfare; water supply and sanitation; housing; urban development; welfare of SCs, STs
and OBCs, labour and labour welfare; social security and welfare, nutrition, relief on account of
natural calamities etc. 2. Expenditure on ‘Education’ pertains to expenditure on ‘Education,
Sports, Arts and Culture’. 3. Expenditure on ‘Health’ includes expenditure on ‘Medical and
Public Health’, ‘Family Welfare’ and ‘Water Supply and Sanitation’

School and Higher Education Infrastructure

Since the Indian economy will have the highest young population in the world
over the next decade, the country’s growth and development in the coming years
will primarily rely upon its ability to provide high-quality educational
opportunities to them. The progress in school and higher education infrastructure
is given in Table 5.2.

Table 5.2: Increase in Number of Recognised Schools, Colleges and Universities

Infrastructure
Year Primary and Secondary and Colleges Universities
Upper Primary Sr. Secondary
Schools (in lakhs) Schools (in lakhs)
2011-12 11.93 2.12 34852 642
2018-19 12.37 2.76 39931 993
Source: Education Statistics at a Glance, 2018 & U-DISE+ Report and AISHE Report 2018-19,
M/o Education

Physical Infrastructure
Physical infrastructure implies those infrastructures which directly support the
process of production and distribution in the economy. It is directly concerned
with the needs of such production sectors as agriculture, industry, trade, etc.
They indirectly increase the factor productivity and the economy sees the impact
immediately. Physical infrastructure leads to growth in the short run. A few such
examples are energy, irrigation, transportation, telecommunication, banking,
insurance, technology, finance, etc.

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Check Your Progress 1 Physical and Social
Infrastructure
1) What is the importance of infrastructure in a country’s development? What
kind of activities does it comprise?
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2) What are the types of infrastructure?
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3) Describe the relationship between infrastructure and Economic Growth with
reference to the experience of the Indian Economy.
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4) Distinguish between social infrastructure and physical infrastructure and
there importance for the economy.
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5.2 PRIVATISATION AND

COMMERCIALISATION OF
INFRASTRUCTURE
The heavy-industry-led-growth strategy embodied in our earlier plans
contemplated an active role for the state in all spheres of economic activity.
Investment in infrastructure became the exclusive preserve of the public sector.
The public sector, although it recorded phenomenal growth, could not live up to
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Indian Economic Development: the opportunities and expectations offered by the changing technology and
An Overview
evolving new international environment. With the onset of the 1980s, it was
becoming increasingly clear that there was no alternative but to commercialise
the infrastructure sector and open it to private enterprise and capital. Private
participation in infrastructure development depends upon its capability to
commercialise the infrastructure services.

5.2.1 Need for Privatisation and Commercialisation

The different factors that call for immediate privatisation and commercialisation
of infrastructure can be identified as follows:

Massive Investment Needs: Infrastructure development requires massive

investments and it is not possible for the state to meet all the investment needs.

Managerial Constraints in the Public Sector: While the infrastructure business

is becoming more complex, public sector has not been able to meet the managerial
challenges and as a result, the supply could not grow at the desired pace. The
fiscal stringency has also created a demand for accountability for public spending.

Therefore, a demand has arisen for commercialisation and greater privatisation

of infrastructure sector in order to inject greater efficiency.

Changes in Technology: The possibility of marginal pricing and exclusion

provides greater scope for commercialisation. Technological changes have made
it possible to unbundle the infrastructure service thereby introducing the elements
of competition. The use of new technology enables the charging of the marginal
user.

Globalisation: The availability, quality, cost and reliability of infrastructure

services are key factors in attracting foreign investment. Globalisation has been
aided significantly by advances in transport, telecommunication and storage
technology.

New Dynamism in World Capital Market: Since 1990s the capital markets,
domestic as well as global, have witnessed a significant re-emergence. During
this period there has been a nearly four-fold increase in gross private capital
flows to the developing countries. Private flows are now around three times the
official development assistance. Thus, the private sector now has access to the
kind of resources needed for infrastructural development.

5.2.2 Prerequisites for Private Investment

Entry of private capital in infrastructure sector is not merely a matter of simple
policy initiatives. A few other important and critical areas would have to be
identified and a suitable environment created.

Commercialisation of Infrastructure: Infrastructure services should not be

treated as public goods. In this regard, the possibility of commercialisation will
depend on the ability to segregate payers and prevention of any incidence of
‘free riding’. Thus the excludability is a key factor in commercialisation.

Pricing Policy: The role of private sector is not restricted to that of provident of
funds. It has to play the role of efficient and accountable operator of the facility.
116
The issue of pricing of infrastructure services becomes critical here. In this sphere Physical and Social
Infrastructure
the long track record of uneconomic pricing and prevalence of subsidies will be
major obstacles.

Demand Orientation of Services: The existing procedure of financing

infrastructure facilities is based on plan allocation and is mainly supply-oriented.
Insufficient stress on the existing infrastructure and the anticipated demand has
resulted in deviations in different counties and consequently a large part of such
investments are not providing sufficient returns. Privatisation will necessitate a
demand-oriented approach.

The challenge for policy is to find appropriate market signals which indicate the
future trend of infrastructure demand and to coordinate the supply of such facilities
in such a manner that investment in infrastructure provides appropriate returns.

Allocation of Risk: Allocation of risk is of key importance in commercialisation

of infrastructure. The risk should be appropriately demarcated and allocated to
different stake-holders. This is important for two reasons:
i) There is a tendency among the private shareholders to shift the risk to the
government.
ii) There is also a tendency among the shareholders to shift the risk on each
other.
Direct Participation by the Government: While the existence of elements of
monopoly in infrastructure will necessitate regulation by the government,
constraints in financing and user charging will render the direct participation by
the government necessary. Therefore, a transparent framework for promotion of
synergistic firmness of public-private partnership in infrastructure is required.

A Suitable Regulatory Framework: Most of the infrastructure projects are right

candidates for developing as a ‘natural monopoly’. These cost per unit scale of
output. But these units cannot be allowed, in the interest of public welfare, to
eschew competition. A healthy guided competition is required for sound growth.
This presupposes the existence of an effective regulatory system.

5.3 PHYSICAL INFRASTRUCTURE: GROWTH

AND POLICY ISSUES
5.3.1 Transport Sector
Transport is an essential economic infrastructure for the rapid development of
any region. The lack of transport facilities retards the process of economic
development even if a region is endowed with rich natural resources. Transport
has been recognised as an indispensable ingredient of a country’s overall
development.

5.3.1.1 Roads

India has the one of largest road network across the world, spanning over a total
of 59 lakh km of road length. This road length includes National Highways (NHs),
Expressways, State Highways (SHs), district roads, PWD roads, and project roads.
In India, road infrastructure is used to transport over 60 per cent of total goods
117
Indian Economic Development: and 85 per cent of total passenger traffic. Road transportation has gradually
An Overview
increased over the years with the improvement in connectivity between cities,
towns, and villages in the country.

Market size
As of March 01, 2019, the total length of National Highways in India stood at
132,499 km. Huge investments have been made in the sector with total investment
increasing more than three times from Rs. 51,914 crore in 2014-15 to Rs. 158,839
crore in 2018-19. The total national highways length increased to 122,434 kms
in FY18 from 92,851 kms in FY14.
However, the roads sector has been facing several issues including:
i) lack of equity with developers,
ii) higher cost of financing,
iii) shortfall in funds for maintenance,
iv) unavailability of land for the expansion of NHs,
v) significant increase in land acquisition cost,
vi) bottlenecks and checkpoints on NHs which could adversely impact benefits
of GST, and
vii) the value of NPAs in the infrastructure sector (including roads and highways)
has been increasing, with NPAs at around Rs. 2.6 lakh crore as of August
2016.
Issues with financing
As observed by the Standing Committee on Transport (2016), the Ministry of
Road Transport and Highways does not have its own source of revenue other
than budgetary support from the central government, also huge budget allocations
by the central government would be unsustainable in the long-run. Hence, there
is a need to set up Ministry’s own dedicated financial institutions to generate
funds for development of the road sector.

As noted by the Standing Committee on Transport (2018), road development

needs concerted efforts in the form of mobilisation of funds from other sources
as private sector involvement has been depleting in recent years.

Targets vs Performance
Achievement of construction targets (for NHs) has ranged between 55 per cent
and 70 per cent during the period 2014-15 to 2019-20. The targets could not be
met due to shortage of funds as noted by the Standing Committee on Transport
(2017). Other reasons for incomplete projects include delays in obtaining
clearances, poor financial and technical performance of the contractors, and law
and order issues. The Economic Survey 2018-19 also highlighted issues, such
as time and cost overruns, due to delays in project implementation, procedural
delays, and lesser traffic growth than expected, which increased the risk factor
of the projects resulting in stalling of projects.

Project Delays and increase in Project Costs

The Committee on Public Undertakings (2017) had noted that from 1995, till
June 2016, out of the total 388 projects completed, only 55 projects were
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completed on or before time. Delays in the completion of the projects were Physical and Social
Infrastructure
mainly attributed to: (i) the long time taken in land acquisition, and obtaining
environment and forest clearances, (ii) poor performance of concessionaires due
to economic slowdown, (iii) cash flow problems, and (iv) law and order
issues. Such delays increase project costs, eventually making certain projects
unviable.   
Government Initiatives
Some initiatives undertaken by the government are as follows:
The Government of India has allocated Rs. 111 lakh crore (US$ 13.14 billion)
under the National Infrastructure Pipeline for FY 2019-25. The Roads sector
is expected to account for 18 per cent capital expenditure over FY 2019-25.
Government of India approved the launch of Phase-III of its rural road
programme Pradhan Mantri Gram Sadak Yojana (PMGSY) which aims at
consolidation of 1,25,000 kms through Routes and Major Rural Links that
connect habitations to Gramin Agricultural Markets (GrAMs), Higher
Secondary Schools and Hospitals with an estimated cost of Rs. 80,250 crores
for the period 2019-20 to 2024-25.
A total of 65,000 km of roads and highways are to be constructed under
Bharatmala Pariyojana.
100 per cent FDI is allowed under the Automatic route subject to applicable
laws and regulations.
Connectivity in Remote Areas: The Ministry of Road Transport and
Highways also allocates funds towards the development of highways in
areas with poor connectivity. Some of these projects include the Special
Accelerated Road Development Programme in North East (SARDP-NE),
Externally Aided Projects and Roads Projects in Left-Wing Extremism
Affected Areas.
In order to accelerate the pace of construction, large number of initiatives
has been taken to revive the stalled projects and expedite completion of
new projects by the Ministry of Road Transport and Highways. These
include:
i) Streamlining of land acquisition and acquisition of major portion of
land prior to invitation of bids.
ii) Award of projects after adequate project preparation in terms of land
acquisition, clearances, etc.
iii) Close coordination with other Ministries and State Governments
iv) One time fund infusion
v) Regular review at various levels and identification/removal of
bottlenecks in project execution
vi) Proposed exit for Equity Investors
vii) Securitisation of road sector loans
viii) Disputes Resolution mechanism revamped to avoid delays in completion
of projects.

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Indian Economic Development: 5.3.1.2 Railways
An Overview

The Indian Railways is among the largest rail networks in the world. The Indian
Railways route length network is spread over 1,23,236 km, with 13,452 passenger
trains and 9,141 freight trains from 7,349 stations plying 23 million travellers
and 3 million tonnes (MT) of freight daily. The railway network is ideal for long-
distance travel and movement of bulk commodities, apart from being an energy
efficient and economic mode of conveyance and transport. Indian Railways is
the preferred carrier of automobiles in the country.

Government of India has focused on investing in railway infrastructure by making

investor-friendly policies. It has moved quickly to enable Foreign Direct
Investment (FDI) in railways to improve infrastructure for freight and high-speed
trains. At present, several domestic and foreign companies are also looking to
invest in Indian rail projects. Foreign Direct Investment (FDI) inflows into
Railways Related Components from April 2000 to June 2020 stood at US$ 1.12
billion.

Government initiatives
Few initiatives taken up by the Government are:
Freight on Priority: Railways has embraced a “Freight on Priority” policy
by pushing for an aggressive customer-centric approach to expand the freight
carried not only from the traditional segments but also by attracting new
customers to its fold.
India entered a new era of mobility with Vande Bharat Express - India’s
first high-tech, energy-efficient, self-propelled train. This is a prime example
of the success of Make in India movement. This train will be proliferated
across India and also exported globally.
The Railways is undertaking measures for improving speed of both passenger
and freight trains. Indian Railway is constructing more than 3000 km of
Dedicated Freight Corridor (DFC), which would enable freight trains to run
at speed of 100 kmph.
Dedicated Freight Corridors which are special tracks and arrangements for
goods trains are getting completed at unprecedented speed. They are expected
to decongest the existing Indian Railway network, increase the average
speed of goods trains from existing 25 to 70 kmph., run Heavy Haul trains,
facilitate the running of longer (1.5 km) and double stack container trains,
connect the existing ports and industrial areas for faster movement of goods,
ensure an energy efficient and environment friendly rail transport system as
per global standards, increase the rail share from existing 30 per cent to 45
per cent and reduce the logistic cost of transportation.
New Services in Passenger Operations with PPP in Train Operations:
Railways is now undertaking a partnership approach for passenger train
operations in order to enhance overall service quality and operational
efficiency. This aims at improving the passenger experience and bringing
modern technologies and private investments
India has made a huge leap of self-sufficiency in manufacturing related
activities of the Railways. India is now building modern trains for itself and
exporting it as well. For instance, in Uttar Pradesh only, the Locomotive
120
 Works in Varanasi is becoming a big electric locomotive centre in India. Physical and Social
Infrastructure
The railway coaches which are being built here are now being exported to
foreign countries also.
A National Rail Plan (NRP) 2030 has been developed with a view to develop
infrastructure by 2030 to cater to the traffic requirements upto 2050. Based
on the NRP, a Vision 2024 document has been prepared to develop
infrastructure by 2024 to enhance modal share of Railways in freight
transportation to more than 40 per cent and to cater to the traffic requirements
upto 2030.
Electrification has been accorded high priority as a part of the national goal
to transform India into a green nation. 66 per cent of track length has been
electrified by November 2020. Railways aim to complete electrification of
its entire broad-gauge network by 2023. The speed of electrification has
been greatly scaled up from a level of 1176 km in 2014-15 to 5276 in 2018-
19 and 4378 km in 2019-20.
Government has enhanced the role of the PPP beyond providing maintenance
in the areas such as redevelopment of stations, building private freight
terminals and private container train operations.

5.3.1.3 Shipping and Ports

Ports are economic and service provision units of remarkable significance since
they act as a place for the interchange of two transport modes, maritime and
land, whether by rail or road. With a coastline of about 7,517 km. Indian ports
and shipping industry plays a vital role in sustaining growth in the country’s
trade and commerce. According to the Ministry of Shipping, around 95 per cent
of the country’s trading by volume and 70 per cent by value is done through
maritime transport. The country has 12 major ports and 212 notified non-major
(minor/intermediate) ports along the coast-line and sea-islands. Many ports in
India (such as Mundra Port, Sikka Port, Hazira Port, etc.) are evolving into
specialised centres of economic activities and services and are vital to sustain
future economic growth of the country. Over the last decade, there has been a
steady increase in handling of cargo traffic at Indian ports (refer Table 5.3). The
compound annual growth rate of total cargo throughput at Indian ports during
the period 2001-02 to 2018-19 was 7.4 per cent.
Table 5.3: Growth of Cargo at Indian Ports
Parameters 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Trends in India’s Select: Macro Parameters
Total Cargo 2.2 4.1 8.2 1.9 5.8 6.6 6.1
Source: Based on Data from Major ports and Non-major ports.

However, Indian ports face several infrastructural and operational challenges.

They include: (i) Operational efficiency of Indian ports still lags behind the global
average. For instance, the turnaround time (TAT) at major ports was approximately
2.5 days in 2018-19, whereas global average benchmark is 1-2 days. (ii) last
mile connectivity to the ports is one of the major constraints in smooth movement
of cargo to/from the hinterland. Around 87 per cent of Indian freight uses either
road or rail for transportation of goods where a significant share experiences
“idle time” due to capacity constraints on highways and railway lines. Water-
121
Indian Economic Development: borne transport which is much safer, cheaper and cleaner, compared to other
An Overview
modes of transportation accounts for less than 6% of India’s modal split.
Significant savings can be achieved by shifting movement of industrial
commodities like coal, iron ore, cement and steel to coastal and inland waterways.
(iii) location of industries / manufacturing centres vis-à-vis the ports is such that
the country has a greater container exporting cost than that compared with
competitors like China. Hence, greater savings could be possible with the presence
of major manufacturing and industrial zones in coastal regions in India.

Government initiatives
The Indian Government plays an important role in supporting the ports sector. It
has allowed Foreign Direct Investment (FDI) of up to 100 per cent under the
automatic route for port and harbour construction and maintenance projects. Ports
sector in India has received a cumulative FDI of US $ 1.64 billion between April
2000 and March 2019. In March 2018, a revised Model Concession Agreement
(MCA) was approved to make port projects more investor-friendly and make
investment climate in the sector more attractive. In addition to this, project
UNNATI has been started by Government of India to identify the opportunity
areas for improvement in the operations of major ports. Under the project, 116
initiatives were identified out of which 91 initiatives have been implemented as
of November 2018.

Sagarmala – a Port-led Development Programme

The concept of Sagarmala was approved by the Union Cabinet on 25th March
2015. As part of the programme, a National Perspective Plan (NPP) for the
comprehensive development of India’s 7,500 km coastline, 14,500 km of
potentially navigable waterways and maritime sector has been prepared.
Components of Sagarmala Programme are:

Port Modernisation and New Port Development: De-bottlenecking and

capacity expansion of existing ports and development of new greenfield ports

Port Connectivity Enhancement: Enhancing the connectivity of the ports to

the hinterland, optimising cost and time of cargo movement through multi-modal
logistics solutions including domestic waterways (inland water transport and
coastal shipping)

Port-linked Industrialisation: Developing port-proximate industrial clusters

and Coastal Economic Zones to reduce logistics cost and time of EXIM and
domestic cargo.

Coastal Community Development: Promoting sustainable development of

coastal communities through skill development and livelihood generation
activities, fisheries development, coastal tourism etc.

Coastal Shipping and Inland Waterways Transport: Impetus to move cargo

through the sustainable and environment-friendly coastal and inland waterways
mode.

The Indian government plans to develop 10 coastal economic regions as part of

plans to revive the country’s Sagarmala (string of ports) project.

122
Achievements Physical and Social
Infrastructure
Some of the achievements of the government include: Turnaround time at major
ports in India has decreased at a rapid pace from 82.32 hours in FY17 to 59.51
hours in FY19. Five times more growth in major ports’ traffic recoded during
2014-18, compared to 2010-14. Increased efficiency has led three times increase
in net profits of major ports between FY14-18.

5.3.1.4 Aviation

As of 2019, India is the ninth largest aviation market with a passenger throughput
of 344 million. As of 2021, the sector has 91 international carriers comprising of
5 Indian carriers and 86 foreign carriers connecting over 40 countries; and the
sector is contributing US $ 72 billion to GDP. The Ministry of Civil Aviation is
the nodal authority responsible for the formulation of national policies and
programmers for development and regulation of the civil aviation industry in the
country. The growth of airlines traffic in the Indian aviation industry is almost 4
times above the international average. In the year 1991, a total of 10,717,400
passengers were carried in Indian airlines. This number grew multifold to
139,822,450 in 2017. In addition to a robust GDP growth driving increased spends
on air travel, low fares have led to a rise in demand in smaller-towns of India.
India Airlines market despite of being the fastest growing market, has been one
of the toughest aviation markets in the world due to–
- High fuel prices (a sales tax of nearly 30 per cent is levied on jet fuel which
jacks up flight operations for airlines; also, there is an excise duty of 11 per
cent levied on jet fuel since October 2018);
- Poor and insufficient infrastructure (air traffic is increasing, consequently
space is decreasing to accommodate them);
- Low cost carriers have made the market extremely price sensitive, rigid
regulations, i.e., ample regulations and laws still hold back the industry and
do not provide room for improvement and profits.

Post reforms of 1991, aviation sector saw a major reform in its structural and
operational context. The major reforms that redesigned the aviation sector were:
1) Liberalisation: Repealing of the monopolistic Air Corporation Act in 1994
was followed by heavy disinvestment in the two public sector airlines– Indian
Airlines Corporation and Air India International, leading to the opening up
of the domestic sector to private players, bringing in more competition and
the resulting benefit of reduced fares.
PPP model: Amidst the constrained fiscal position, the government has given
way to new financing models for the development of airports. Public Private
Partnership (PPP) model i.e. Build Operate and Transfer (BOT), Build Own
Operate and Transfer (BOOT) have been tried for development of Airports
in India. For instance, in November 2018, the Government of India approved
a proposal to manage six AAI airports under public private partnership (PPP)
situated in Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram
and Mangaluru.
2) Open Sky Policy: The Open Sky Policy which allows foreign airlines of
any country or ownership to land at any port on any number of occasions
123
Indian Economic Development: and with unlimited seat capacity brought in a massive change in the aviation
An Overview
sector. That is, the Government opened the skies to private players.
3) FDI Policy: Government has put in place an investor friendly policy on FDI
in the aviation sector, under which 100 per cent FDI (Automatic up to 49
per cent and Government route beyond 49 per cent) is permitted in scheduled
Air Transport Service/Domestic Scheduled Passenger Airline, while for NRIs
100 per cent FDI is permitted under the automatic route. Also, foreign
investment in M/s Air India Ltd is brought on a level playing field with
other scheduled airline operators with the amended FDI policy which enables
foreign investment by NRIs into M/s Air India Ltd. up to 100 per cent under
automatic route. According to data released by the Department of Industrial
Policy and Promotion (DIPP), FDI inflows in India’s air transport sector
(including air freight) reached US$ 1,904.37 million between April 2000
and June 2019.
4) Low Cost Carriers (LCC): In 2003 Low Cost Carrier (LCC) entered the
domestic aviation industry which led to substantial fall in the market
share of Legacy carriers such as Air India, Indian Airlines and Jet
Airways giving rise to fierce price wars between various airlines. The
period following the introduction of the LCCs has been one of rapid
growth for the Indian airline industry as they enhanced the affordability
of air travel and hence the demand for air travel in India.
5) Greenfield Airports: A greenfield airport denotes a project that lacks
constraints, imposed upon it by prior work or existing infrastructure. In
2007, the Indian government finalised the policy on greenfield airports.
According to the new policy, state governments wanting to set up a greenfield
airport could either do so themselves or through any designated entity or a
joint venture company. For instance, the Government of Andhra Pradesh is
to develop Greenfield airports in six cities under the PPP model.

5.3.2 Telecommunications
India is currently the world’s second largest telecommunications market with a
subscriber base of 1.19 billion and has registered strong growth in the past decade
and half. The telecommunication industry in India is rapidly growing and
witnessing many developments. The sector is becoming more competitive day-
by-day, with the introduction of new players (which in turn has led to sharp and
steady decline of average revenue per user) and has truly revolutionised the way
we communicate and share information The exponential growth is primarily
driven by affordable tariffs, wider availability, roll out of Mobile Number
Portability, expanding 3G and 4G coverage and the onset of 5G technologies,
evolving consumption patterns of subscribers and a conducive regulatory
environment. The industry has undergone a major process of transformation
through several policy reforms and regulations. These include:

1) Liberalisation: With the announcement of the New Economic Policy in July

1991, the telecom sector was declared open to the private sector. This initiated
the transformation of the once government owned monopolistic telecom
market to a multi-operator open competitive market.

2) National Telecom Policy of 1994: In 1994, the government announced the

124 National Telecom Policy which further stimulated the growth of the
 industry by provision of world class services at reasonable rates, Physical and Social
Infrastructure
promotion of exports, stimulation both domestic and foreign direct
investments.

3) The Telecom Regulatory Authority of India Act, 1997: Established Telecom

Regulatory Authority of India (TRAI) which was necessary to regulate the
private players in the telecom sector.

4) New Telecom Policy of 1999: Laid down a clear road map for future reforms
by opening by all the sectors in telecommunications to private players.

5) National Telecom Policy 2012: Launched to provide secure, reliable,

affordable and high quality converged telecommunication services anytime,
anywhere for an accelerated inclusive socio-economic development.

6) National Digital Communications Policy 2018: Launched to ensure digital

sovereignty. For instance, under it the government aims to provide universal
broadband connectivity at 50 Mbps to every citizen.

7) Technological Innovations: The growth of telecom industry has also

been fuelled by the launch of newer telecom technologies like 3G, and
Broadband Wireless Access (BWA), and emergence of cloud technologies.
Efforts are continuously made to develop affordable technology for
masses and reinvigorate the maturing urban markets and help in bringing
balanced growth of economy.

8) FDI Policy: FDI cap in the telecom sector has been increased to 100 per
cent from 74 per cent; out of 100 per cent, 49 per cent will be done through
automatic route and the rest will be done through the approval route. FDI of
up to 100 per cent is permitted for infrastructure providers offering dark
fibre, electronic mail and voice mail. FDI inflows into the telecom sector
during April 2000 – March 2019 totaled to US$ 32.82 billion, according to
Department for Promotion of Industry and Internal Trade (DPIIT).

5.3.3 Power
Power is one of the most critical components of infrastructure crucial for the
economic growth and welfare of people. India’s power sector is one of the most
diversified in the world. Sources of power generation range from conventional
sources such as coal, lignite, natural gas, oil, hydro and nuclear power to viable
non-conventional sources such as wind, solar, small hydro and biomass. The
country’s achievements in the power sector in the recent years have been
outstanding. Electricity generation (both from conventional and non-conventional
sources) increased from 808.5 billion units (BU) (in 2009-10) to 1389.1 BU (in
2019-20), a growth of around 72 per cent. As of January 2021 the national electric
grid in India has an installed capacity of 377.261 Giga Watts (GW).

The Government is implementing reforms towards a secure, affordable and

sustainable energy system to power a robust economic growth. Some of the key
policy reforms in the power sector include:

Liberalisation: India’s generation capacity has increased considerably. This

increase is attributed to the delicensing of power generation in 2003, which
enabled unrestricted participation of private sector companies. India now has 125
Indian Economic Development: the institutional framework it needs to attract more investment for its growing
An Overview
energy needs. Between April 2000 and June 2019, the industry attracted US$
14.54 billion in Foreign Direct Investment (FDI), accounting for 3 per cent of
total FDI inflows in India. Also, Government allows private-sector investment
in coal mining, and has opened up the country’s oil and gas retail markets.

Pricing Reforms: The country is taking advantage of the important energy pricing
reforms in the coal, oil, gas, and electricity sectors which are fundamental to
further opening the energy market and improving its financial health.

Energy Security: India’s electricity security has improved markedly through the
creation of a single national power system and major investments in thermal and
renewable capacity. It is taking significant steps to enhance its energy security
by fostering domestic production through the most significant upstream reform
of India’s Hydrocarbon Exploration and Licensing Policy (HELP) and building
up dedicated oil emergency stocks in the form of a strategic petroleum reserve.

Around 750 million people in India gained access to electricity between 2000
and 2019, reflecting strong and effective policy implementation. As of April 28,
2018, 100 per cent village electrification achieved under Deen Dayal Upadhyaya
Gram Jyoti Yojana (DDUGJY). The country’s energy deficit reduced to 0.7 per
cent in Financial Year (FY) 18 from 4.2 per cent in FY14. Also, the country’s
rank jumped to 24 in 2018 from 137 in 2014 on World Bank’s Ease of doing
business - “Getting Electricity” ranking.

Renewable Energy: India’s power system is currently experiencing a major shift

to higher shares of variable renewable energy. With solar and wind power
becoming cheaper, cleaner sources of energy have also become affordable. As of
November 2020, the country’s renewable power capacity is the 4th largest in the
world generating 136 GW, which is about 36 per cent of our total capacity.

The government is pursuing a very ambitious deployment of renewable energy,

notably solar, and has boosted energy efficiency through innovative programmes
such as replacing incandescent light bulbs with LEDs (under the Ujala scheme).
And it is addressing the serious health problems caused by air pollution for its
major cities, providing 80 million households with liquefied petroleum gas
connection (under the Pradhan Mantri Ujjwala Yojana scheme), thereby reducing
the exposure from biomass cooking stoves, a major cause of respiratory diseases.

Financial Health: The government is working to improve the financial viability

of the power sector which is dealing with surplus capacity, lower utilisation of
coal and natural gas plants, and increasing shares of variable renewable energy.
For instance, Ujwal Discoms Assurance Yojana (UDAY) was launched by the
Government of India to encourage operational and financial turnaround of State-
owned Power Distribution Companies (DISCOMS).

The power generation situation in the country has improved in the last few years.
In June 2017, the Minister of Power announced that India has become a power
surplus country, with no shortage of electricity or coal. Despite this, the sector
continues to face several issues. Access to power and the quality of power supplied
to consumers is still poor. India also continues to face both energy deficit (0.7%)
and peak deficit (2%). The deficit situation is worse in certain states such as
Jammu and Kashmir, and the north-eastern states. Despite all villages being
126
electrified, continuous supply of electricity continues to remain a challenge. Physical and Social
Infrastructure
Another key issue is the poor financial health of the electricity distribution
companies, which is affecting their ability to buy power and improve the supply
network. While their debt to banks was addressed to a certain extent by UDAY,
the debt they owe to power plants remains a concern.

5.3.4 Banking
The Indian banking system consists of 18 public sector banks, 22 private sector
banks, 46 foreign banks, 53 regional rural banks, 1,542 urban cooperative banks
and 94,384 rural cooperative banks as of September 2019. The banking industry
infrastructure has been undergoing revolution wherein the information technology
and electronic funds transfer system have emerged as the twin pillars of modern
banking development. Online infrastructure and internet connectivity allow digital
and direct transfer of Government services and subsidy benefits to the citizens’
bank accounts. The industry has undergone structural transformation through
the years as directed by the following policies and reforms:

i) First Phase of Banking Sector Reforms based on the Narasimham committee

report 1991 included the following measures— lowering Statutory and
Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR), Prudential norms,
Capital Adequacy Norms, Deregulation of Interest Rates, Recovery of Debts
by setting up Special Recovery Tribunals, enhanced competition from new
Private sector banks (which were allowed to raise capital contribution from
foreign institutional investors up to 20 per cent and from NRIs up to 40 per
cent).
ii) Second Phase of Banking Sector Reforms based on Narasimham committee
report 1998 included the following measures— Opening up of New Areas
(Insurance, credit cards, asset management, leasing, gold banking, etc.) and
New Instruments (Interest rate swaps, cross currency forward contracts, etc.,
Risk Management and Strengthening Technology (with electronic funds
transfer, centralised fund management system, etc.), increase in FDI limit,
adoption of Global Standards and Information Technology (by introduction
of e-banking, telephone banking, etc.), management of NPA, guidelines for
Anti-Money laundering, Base Rate System of interest rates, etc.
iii) Financial Inclusion: Financial Inclusion is a national priority as it is an enabler
for inclusive growth by providing an avenue to the poor for bringing their
savings into the formal financial system, an avenue to remit money to their
families in villages besides taking them out of the clutches of the usurious
money lenders. A key initiative towards this commitment is the Pradhan
Mantri Jan Dhan Yojna (PMJDY), which involves ensuring access to
financial services, namely, Banking/Savings & Deposit Accounts,
Remittance, Credit, Insurance, Pension in an affordable manner.
One of the leading issues concerning the banking sector is that of mounting
stressed assets which have plagued the banking sector, especially the public sector
banks since long. Several initiatives have been undertaken and are also underway
to strengthen the regulatory and supervisory frameworks aimed at increasing the
resilience of the banking system. These include:

Recapitalisation of Public Sector Banks: Government announced Indradhanush

plan for revamping Public Sector Banks (PSBs) in August 2015 by infusing capital 127
Indian Economic Development: of Rs. 70,000 crore over a period of four financial years. Capital infusion is
An Overview
aimed at supplementing the achievement of regulatory capital norms by PSBs
through their own efforts and, in addition, based on performance and potential,
augmenting their growth capital.

Merger of Public Sector Banks: Since 2016, effective action has been undertaken
to consolidate Public Sector banks by way of amalgamation. The merger of banks
is expected to facilitate the creation of strong and competitive banks in the Public
Sector space to meet the credit needs of a growing economy, absorb shocks and
have the capacity to raise resources without depending unduly on the State
exchequer.

In 2014, the Committee to Review Governance of Boards of Banks in India (P.J.

Nayak Committee) was also constituted. Its key recommendations focused on
enhancing the governance and management of public sector banks which
continued to have a large presence in India’s banking sector.

Resolution of Stressed Assets: The resolution mechanism is instituted through

Insolvency and Bankruptcy Code (IBC), 2016 which provides a market
mechanism for time-bound insolvency resolution enabling maximisation of value.

5.3.5 Housing and Urban Infrastructure

Usually, urban infrastructure builds up gradually in sync with the progress of
industrialisation, as has been experienced by the western world. In contrast to
this, in India, urbanisation and the attached pressure to build the urban
infrastructure have not been gradual in sync with the industrial growth. This is
because of the rapid pace with which the urban population has been growing.
This increase is because of two reasons– first is the natural increase of urban
population and second is the migration from rural to urban areas. This migration
has been more so surging post 1990 reforms when Indian economy and especially
the urban areas started to experience rapid economic growth. According to Census
2011, 377.1 million Indians comprising 31.14 per cent of the country’s population
lived in urban areas. As per the estimates by the UN, urban India accounted for
close to 34 per cent of its total population in 2018 and the number is forecasted
to exceed 50 per cent by 2046. (Refer Table 5.4). This necessitates investments
in housing, road network, urban transport, water supply, power-related
infrastructures, smart cities, and other forms of urban management.
Table 5.4: Urbanisation in India

Persons in Million Decadal Growth in

Numbers Population %
2001 2011 1991-2001 2001-2011
Total 1029 1210 21.5 17.6
Rural 743 833 18.1 12.2
Urban 286 377 31.5 31.8

Urbanisation is a major driving force behind Indian economic growth and

contributes close to 60 per cent of its Gross Domestic Product. While urbanisation
process resulted into economic growth in the country, but equally it is true that,
128 there exist number of problems associated with the urbanisation. Some of them
include: urban air and water pollution resulting in global warming and climate Physical and Social
Infrastructure
change; exorbitant levels of urban solid waste, inadequate urban transport.

Policy Initiatives

The urbanisation in India is inevitable thus, the need for solving the various
problems associated with it requires a combination of actions, starting with
increased investment; strengthening the framework for governance, and most
importantly capacity building for the people and the institutions engage in urban
affairs.

Recognising the vast impact that Urbanisation has on the environment, the Indian
government committed its Intended Nationally Determined Contribution (INDC)
to United Nation Framework Convention on Climate Change (UNFCCC) in 2015.
The INDC centres around India’s policies and programmes on promotion of clean
energy, resilient urban centres, promotion of waste to wealth, safe, smart and
sustainable green transportation network, abatement of pollution and efforts to
fight the build-up of carbon by enhancing the carbon sink through creation of
forest and tree cover.

The government of India has launched various programmes to address urban

governance issues and gaps in infrastructure. Some of the key programmes include
the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Heritage
City Development and Augmentation Yojana (HRIDAY), Smart Cities Mission,
Clean India Mission and R-Urban Mission.

The Real Estate (Regulation and Development) Act, 2016 (RERA): The RERA
is one of the significant reforms implemented in the real estate sector with an
objective to ensure regulation and promote real estate sector in an efficient and
transparent manner and to protect the interest of home buyers.

The Pradhan Mantri Awas Yojana- Urban (PMAY-U)– which envisions ‘Housing
for All-Urban’, was launched in June, 2015 to provide pucca house with basic
amenities to all eligible urban poor by 2022.

The country is participating in the United Nations’ “New Urban Agenda”, which
aims to make cities more networked, closer to their citizens and more sustainable
in the future. In the “Housing for all” project, the government aims to provide
affordable housing even for the poorest – a total of 20 million houses in more
than 2,500 cities. And with the “Smart Cities Mission”, more than 100 urban
spaces are to be transformed into digitally networked conurbations.

5.4 SOCIAL INFRASTRUCTURE: GROWTH AND

POLICY ISSUES
5.4.1 Education
India holds an important place in the global education industry. By 2030, India is
set to have the largest working age population in the world. Not only do they
need literacy but they need both job and life skills. This provides a great
opportunity for the education sector. India’s educational system broadly comprises
school education (elementary, secondary and higher secondary), higher education
(general and professional) and vocational education. The Ministry of Human
129
Indian Economic Development: Resource Development (MHRD) is the nodal ministry for the sector. Expenditure
An Overview
in education sector as percentage of GDP increased from 2.8 per cent in 2014-15
to 3.1 per cent in 2019-20. As per the data released by Department for Promotion
of Industry and Internal Trade (DPIIT), the total amount of Foreign Direct
Investment (FDI) inflow into the education sector in India stood at US$ 2.47
billion from April 2000 to March 2019.

India has seen a rapid expansion in the higher education sector since 2001. There
has been a dramatic rise in the number of higher education institutions (HEIs)
and enrolment has increased fourfold. The Indian higher education system is
now one of the largest in the world, with 993 Universities, 39931 Colleges and
10725 Stand Alone Institutions. Despite the increased access to higher education
in India, challenges remain. Low employability of graduates, poor quality of
teaching, weak governance, insufficient funding, and complex regulatory norms
continue to plague the sector. India’s gross enrolment ratio (GER) in 2018-19
was 26.3 per cent but still far from meeting the MHRD’s target of achieving 50
per cent GER by 2035.

Government Initiatives
Indian educational policy and reforms emphasised on overcoming challenges to
improve low enrolment ratio in higher education, low quality of teaching and
learning, constraints on research capacity and innovation, uneven growth and
access to learning opportunities, etc. Some of the major initiatives taken by the
Government of India are:
SWAYAM (Study Webs of Active learning for Young Aspiring Minds)– a
programme initiated by Government of India and designed to achieve the
three cardinal principles of Education Policy viz., access, equity and quality.
The National Digital library of India (NDLI)– a project initiated under the
National Mission on Education through Information and Communication
Technology (NMEICT) to develop a virtual repository of learning resources
with a single-window search facility.
The Mission of Unnat Bharat Abhiyan to leverage the intellectual capital of
higher educational institutions for the upliftment of rural India.
The Pandit Madan Mohan Malaviya National Mission on Teachers and
Teaching (PMMMNMTT) to address issues related to teachers and teaching.
Prime Minister Research Fellows (PMRF) scheme to support 1000 bright
undergraduate students every year, for direct admission in the research
programmes in the reputed institutions like IISc, IITs.
The National Institutional Ranking Framework (NIRF) adopted by the
MHRD to rank institutions of higher education in India.
Sarva Shiksha Abhiyan – a Centrally Sponsored Scheme in partnership with
State Governments for universalising elementary education across the
country.
National Education Policy 2020: The National Education Policy (NEP),
2020 – approved by the Union Cabinet on 29th July 2020 to make way for
large scale, transformational reforms in both school and higher education
sectors – is built on the foundational pillars of Access, Equity, Quality,
130
 Affordability and Accountability. Key highlights of the policy include: Physical and Social
Infrastructure
- Ensuring Universal Access at all levels of school education;
- Early Childhood Care and Education with new Curricular and
Pedagogical Structure;
- Reforms in school curricula and pedagogy;
- Emphasis on promoting multilingualism and Indian languages;
- Assessment reforms;
- Equitable and inclusive education;
- Robust and transparent processes for recruitment of teachers and merit-
based performance;
- Exposure of vocational education in school and higher education system;
- Increasing GER in higher education to 50 per cent by 2035;
- Holistic Multidisciplinary Education with multiple entry/exit options;
- Expansion of open and distance learning to increase GER.
- The Centre and the States to work together to increase the public
investment in Education sector to reach 6 per cent of GDP at the earliest.
In pursuance with the Prime Minister’s vision for ‘Transforming India’,
Ministry of Human Resource Development took a leap forward in
transforming education sector with the motto of “Education for All, Quality
Education”. MHRD has launched—
(i) Pradhan Mantri Innovative Learning Program– DHRUV; (ii) NISHTHA–
National Initiative for School Heads’ and Teachers’ Holistic Advancement;
(iii) Integrated Online junction for School Education ‘Shagun’; (iv) a five-
year vision plan named Education Quality Upgradation and Inclusion
Programme (EQUIP); (v) Several new schemes in Higher Education
Department to boost research and Innovation culture in the country.
Degree level full-fledged online education programme started to provide
quality education to students of deprived sections of the society as well as
those who do not have access to higher education. Through this initiative
Gross Enrolment Ratio will be increased.

Looking ahead
In 2030, it is estimated that India’s higher education will adopt transformative
and innovative approaches and will emerge as a single largest provider of global
talent, with one in four graduates in the world being a product of the Indian
higher education system.

5.4.2 Health
Depending on the level of care required, healthcare in India is broadly classified
into three types. This classification includes primary care (provided at primary
health centres), secondary care (provided at district hospitals), and tertiary care
institutions (provided at specialised hospitals like AIIMS). Primary health care
infrastructure provides the first level of contact between health professionals
and the population. Broadly, based on the population served and the type of
131
Indian Economic Development: services provided, primary health infrastructure in rural areas consists of a three-
An Overview
tier system. This includes Sub-Centres (SCs), Primary Health Centres (PHCs),
and Community Health Centres (CHCs). A similar set up is maintained in urban
areas.

Issues concerning the Healthcare sector in India include:

A) Shortfall at different levels of the healthcare delivery system.  As of 2018,
there is a shortage of 2,188 CHCs, 6,430 PHCs and 32,900 SCs.

B) Shortfall of doctors. As of 2018, there is a shortfall of 46 per cent of doctors,

and 82 per cent of specialists including surgeons, obstetricians,
gynaecologists, physicians, and paediatricians in Primary Health Centres
across India. Certain reasons identified for the shortage of personnel in
government facilities include: (i) poor working environment, (ii) poor
remuneration making migration to foreign countries and to the private sector
more attractive, and (iii) procedural delays in recruitment and poor forward
planning for timely filling up of positions.

C) Low public health spending in healthcare. The public health expenditure

(sum of central and state spending) has remained between 1.2 per cent to
1.5 per cent GDP between 2008-09 and 2018-19, which is relatively low as
compared to other countries. This has been resulting in high out of pocket
healthcare expenditure. It is estimated that 65 per cent of the health
expenditure is borne by consumers in India

Government Initiatives
Some of the major initiatives taken by the Government of India to promote Indian
healthcare industry are as follows:
Pradhan Mantri Swasthya Suraksha Yojana (PMSSY): a Central Sector
Scheme, announced in August 2003 to address imbalances in availability of
tertiary care hospitals and improve medical education in the country. It has
two components– Setting up of new AIIMS, and up-gradation of existing
State/Central Government Medical College/Institutions (GMC).
Mission Indradhanush: launched in 2014 to strengthen and re-energise the
programme and achieve full immunisation coverage for all children and
pregnant women at a rapid pace.
Ayushman Bharat Yojana: a national initiative launched as the part of
National Health Policy 2017, in order to achieve the vision of Universal
Health Coverage (UHC). The Ayushman Bharat comprises of two inter-
related components, (i) Establishment of Health and Wellness Centres, and
(ii) Pradhan Mantri Jan Arogya Yojana (PM-JAY)
Pradhan Mantri Jan Arogya Yojana (PMJAY): Launched in September 2018
under the Ayushman Bharat programme, PMJAY aims to provide a cover of
Rs. five lakh per family per year to 10.7 crore families (no cap on family
size and age) belonging to poor and vulnerable population for secondary
and Tertiary Healthcare.
The National Medical Commission Act, 2019: A legislation passed by
Parliament to provides for a medical education system which ensures: (i)
132 availability of adequate and high quality medical professionals, (ii) adoption
 of the latest medical research by medical professionals, (iii) periodic Physical and Social
Infrastructure
assessment of medical institutions, and (iv) an effective grievance redressal
mechanism.
The Government of India is planning to increase public health spending to
2.5 per cent of the country’s GDP by 2025.

Looking Ahead
Healthcare has become an important cornerstone in India’s development plan,
with various initiatives including Ayushman Bharat- Health and Wellness Centers
(HWCs) and Pradhan Mantri Jan Arogya Yojana (PM-JAY), Swachh Bharat,
Digital India, Skill India, Start-up India, Make in India etc. In synergy, these
initiatives will comprehensively address the healthcare challenges of India, such
as reducing overall burden of diseases, lowering out-of pocket expenditure,
augmenting healthcare infrastructure and promoting access to quality care.
However, to provide assurance of healthcare for all, the government must
recognise and address the rising concerns and sustainability of the private
healthcare providers, which account for 70 per cent of bed capacity expansion
over the past decade and cater to 60 per cent of inpatient care demands of the
country. As healthcare services and coverage expand, successful implementation
will require a parallel concerted push towards quality assurance, appropriate
governance and regulation, improving referral pathways as well as leveraging
appropriate technologies and innovations at all levels. This will be possible only
with effective collaborations between all the stakeholders, including the private
sector.

5.5 INFRASTRUCTURE: CHALLENGES AND WAY

AHEAD
The Government of India has launched various critical infrastructure projects
like Power for All, Smart Cities Mission, Swachh Bharat mission, and many
more with an objective to build world class infrastructure in the country. However,
as per Ministry of Statistics and Programme Implementation’s (MoSPI) Flash
report of January 2018, it is observed that around 20 per cent of the central
sector projects are delayed beyond their scheduled date of completion. Managing
these complex projects has always been a challenge, especially since these projects
are long-term, involve multiple stakeholders, bring-in new technologies, and
constrained resources. Most of the infrastructure projects are delayed primarily
due to regulatory approvals, issues on land acquisition, shortage of skilled
resources, ineffective dispute resolution mechanism, and geological challenges.
Some of the major challenges faced in the infrastructure development in the
country are:
Land Acquisition: Land acquisition has been the single largest roadblock for the
development of infrastructure. Several projects have been stalled or delayed due
to land acquisition issues. The causes behind delays in land acquisition includes
resistance from farmers or local communities whose land is being acquired and
lack of well-planned, efficient, and demonstrable rehabilitation packages for
displaced persons.
Delay in regulatory and environmental clearance: There are various categories
of approvals required across the project cycle at every stage, right from the pre-
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Indian Economic Development: tendering stage to post-construction causing delays in the process. Clearly, better
An Overview
governance will be a big help in mitigating long delays in infrastructure projects.

Funding Constraints: There is increasing reliance on the private sector for

developing and maintaining infrastructure that need funds for projects that are
often capital intensive and have a high gestation period. The private investment
in infrastructure projects is typically in the form of debt raised by developers.
India’s long-term debt market is not deep enough. Equity markets are not
favourable for financing projects either, because of uncertainties involved in
execution and returns. These issues remain unresolved and continue to create
problems in financing infrastructure projects.

Capacity of private players: Infrastructure projects in India are becoming larger

in size and complexity, and such projects require financial patronage and
additional project management skills, which most medium-to-small Indian
companies currently lack.

Way ahead
Land acquisition: Earlier, the government had made cabinet approval mandatory
for leasing, licensing, or transferring land. By relaxing transfer regulations for
land it owns, the government has taken a positive that should resolve the delay
of projects by procedural issues, and complement the guidelines to resolve land
issues.

Fast-track policy and regulatory reforms for efficient implementation: Sponsoring

agencies need to make a concerted effort to develop strong performance
management systems to drive timely execution of projects including defining
performance standards for nodal agencies and creating a transparent and accurate
tracking mechanism as well as performance-linked incentives and penalties.

Dispute Resolution: To eliminate the issues of delays and litigations, a

Performance Review Unit should be given powers to gather information from
nodal agencies on clearances and incentivise or regulate this.

Facilitate Funding for Infrastructure Projects: In this direction, setting up of

Infrastructure Debt Funds (IDFs) and reduction in ‘withholding tax’ on the interest
paid on these bonds are some other positive measures that are expected to facilitate
the flow of long-term debt into infrastructure projects. Furthermore, introducing
PPP mode by allowing the private sector into some former fully government-
owned infrastructure sectors, such as telecommunications and domestic civil
aviation, has also produced exemplary results. A significant start has been made
in involving the private sector in the provision of transport infrastructure.

Check Your Progress 2

1) Discuss the recent policy initiatives undertaken by Government of India
towards transport infrastructure development in India.
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134
2) Review the importance and present position of the education sector in the Physical and Social
Infrastructure
Indian economy.
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3) What are the major challenges in front of Indian infrastructural development?
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5.6 LET US SUM UP

Infrastructure which can be categorised into physical and social infrastructure
represents the support system that facilitate economic activities and hence the
economic growth. Besides promoting productivity and growth, infrastructure
contributes to domestic market development, it mobilises savings, generates
employment opportunities, leads to social development and social change.
Infrastructure development has remained a national priority, and has played a
pivotal role in helping the country emerge as one of the fastest growing economies
in the world. Several reforms (like Power for All, Smart Cities Mission, Sagarmala,
UDAY, etc.) have already happened across various sub-sectors of infrastructure
including, roads, airports, ports, power and urban utilities and progress have
been however much remain to be achieved to sustain and enhance economic
growth. Also, it is imperative that infrastructure development occurs in a
sustainable manner.

5.7 KEY WORDS

Infrastructure : The stock of fixed capital equipment in a country,
which facilitates different economic activities and
thereby help in economic development of the
country.
Physical Infrastructure : It is directly concerned with the needs of such
production sectors as agriculture, industry, trade,
etc.
Social Infrastructure : It is concerned with the supply of such services
as meet the basic needs of a society like health
services, drinking water, sewerage, sanitation,
electricity, education facilities etc.
Hard Infrastructure : It refers to the large physical networks necessary
for the functioning of a modern industrial nation. 135
Indian Economic Development: Soft Infrastructure : It refers to all the institutions which are required
An Overview
to maintain the economic health, and cultural and
social standards of a country.

5.8 REFERENCES
1) The Concise Oxford Companion to Economics in India by Kaushik Basu;
Annemie Maertens (Editor) ISBN: 9780198063131.
2) India’s Economic Reforms and Development by Isher Judge Ahluwalia; I.
Little (Editor) ISBN: 9780198082231.
3) Handbook of the Indian Economy in the 21st Century by Ashima Goyal
(Editor) ISBN: 9780198097532.
4) Facilitating Infrastructure Development in India, ADB’s Experience and
Best Practices in Project Implementation by Asian Development Bank.
5) IEG paper on ‘Infrastructure in India: Challenges and the Way Ahead’ by
Pradeep Agrawal, IEG Working Paper No. 350, 2015.
6) Economic. Survey 2019-20. Volume 1. Government of India. Ministry of
Finance. Department of Economic Affairs. Economic Division.
7) IBEF Indian Infrastructure- Industry Analysis Reports 2019

5.9 ANSWERS OR HINTS TO CHECK YOUR

PROGRESS EXERCISES
Check Your Progress 1
1) See Sub-section 5.1.1
2) See Sub-section 5.1.3
3) See Sub-section 5.1.4
4) See Sub-section 5.1.7
Check Your Progress 2
1) See Sub-section 5.3.1
2) See Sub-section 5.4.1
3) See Section 5.5

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