Infrastructure sector is fast emerging as a key driver for the Indian economy. Infrastructure is composed of public and private physical structures such as roads, railways, bridges, tunnels, water supply, sewers, electric grids, and telecommunications. In general, infrastructure has been defined as “the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living conditions” and maintain the surrounding environment. India was ranked 44 out of 167 countries in World Bank’s Logistics Performance Index (LPI) 2018, which is a unique bench-marking tool to gauge the drivers of logistics performance. The six components of the LPI are – customs, infrastructure, ease of arranging shipments, quality of logistics services, timeliness, and tracking and tracing. Besides, India has ranked second (3) in the 2021 Agility Emerging Markets Logistics Index.
Infrastructure as a propeller of development
Infrastructure is being considered the sunshine sector in India, propelling growth in the Indian economy particularly as the Government has shown intense focus for initiating policies that ensure time-bound creation of world class infrastructure in the country. According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDIs in the construction development sector (townships, housing, built up infrastructure and construction development projects) and construction (infrastructure) activities stood at US$ 25.78 billion and US$ 17.22 billion, respectively, between April 2000 and September 2020. The logistics sector in India is growing at a CAGR of 10.5% annually and is expected to reach US$ 215 billion in 2020.
According to the economic Survey, 2021, an increase in government spending in an economy having unemployed resources, increases the aggregate demand in the economy, and is likely to induce the private sector to increase their investment in new machinery to cater to the increased demand, thereby channelizing the unused resources to productive uses. Thus, when an increase in public expenditure may enable private investment rather than crowding it out, it may have multiplier effects on aggregate demand, resulting in higher growth rates.
In a developing economy, infrastructure is one such sector, where the fiscal multipliers are large, and so increasing expenditure in this sector may eventually boost growth. Indian economy encountered “once in a century” crisis due to the COVID-19 pandemic that affected economic activities and consequently impacted the livelihood of billions of people. However, working on the strategy of Atmanirbhar Bharat, a large number of remedial measures, reforms, and the sizable stimulus package announced by the Government, India is reeling out of the pandemic blues consistently, with continued focus on infrastructure development.