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Infrastructure is the ‘lifeline’ of an economy as protein is the lifeline of the human body. Whichever sector be the prime moving force of an economy, i.e., primary, secondary or tertiary, suitable level of infrastructure presence is a pre-requisite for growth and development. This is why the Government in India has always given priority to the developmental aspects of the sector. But the level of preparedness and performance had been always less than required by the economy. Which sector are called the infrastructure?
Basically, the goods and services usually requiring higher investment, considered essential for the proper functioning of an economy is called the infrastructure of an economy.58 Such sector might be as many as required by a particular economy such as power, transportation, communication, water supply, sewerage, housing, urban amenities, etc.
There are three sectors which are considered as the infrastructure universally around the world namely power, transportation and communication. Since, infrastructure benefits the whole economy, it has been often argued by the economists that the sector should be funded by the government by means of taxation, partly not wholly.
Indian infrastructure sector is clearly overstrained and has suffered from underinvestment in the post-reforms period.59 Infrastructure bottlenecks are always constraint in achieving a higher growth for the economy. India needs massive investment, both from the public and private sectors, to overcome infrastructure bottlenecks. Investments by the public and private sectors are not alternatives, but complimentary to each other as the required investment is very high. Public investment in the sector depends upon the ability to raise resources (capital) in the public sector and this in turn depends upon the ability to collect the user charges from the consumers. To make this happen following three factors are extremely important:
(i) Reform of the power sector,
(ii) Introduction of road user charges (either directly via tolls or indirectly via a cess on petrol diesel), and
(iii) Rationalisation of railway fares.
Experts60 have suggested for expanding public investment in the sector supplemented duly by a vigorous effort of attracting private investment (domestic as well as foreign). Creating the conducive environment to attract private investment in infrastructure should include:
(i) Simplification and transparency in the clearance procedures;
(ii) Unbundling an infrastructure project so that the private sector may go for only those unbundled segment of the project whose they are able to bear; and
(iii) Providing credible and independent regulatory framework so that the private players get fair treatment.
Putting in place the quality and efficient infrastructure services is essential to realise the full potential of the growth impulses surging through the Indian economy. There is now a widespread consensus61 (now clearly accepted by the Planning Commission) that exclusive dependence on the government for the provision of all infrastructure services introduces difficulties concerning adequate scale of investment, technical efficiency, proper enforcement of user charges, and competitive market structure. At the same time, complete reliance on private production, particularly without appropriate regulation, is also not likely to produce optimal outcomes.62 India, while stepping up public investment in infrastructure, has been actively engaged in finding the appropriate policy framework, which gives the private sector adequate confidence and incentives to invest on a massive scale, but simultaneously preserves adequate checks and balances through transparency, competition and regulation.
The Eleventh Plan63 emphasised the need for removing infrastructure bottlenecks for sustained growth—proposed an investment of US$500 billion in infrastructure sectors through a mix of public and private sectors to reduce deficits in identified infrastructure sectors. As a percentage of the gross domestic product (GDP), investment in infrastructure was expected to increase to around 9 per cent. For the first time the contribution of the private sector in total investment in infrastructure was targeted to exceed 30 per cent. Total investment in infrastructure during the Eleventh Plan is estimated to increase to more than 8 per cent of the GDP in the terminal year of the Plan, which was higher by 2.47 percentage points as compared to the Tenth Plan. The private sector is expected to be contributing nearly 36 per cent of this investment.
An analysis64 of the creation of infrastructure in physical terms indicates that while the achievements in some sectors have been remarkable during the Eleventh Plan as compared to the previous FiveYear Plans, there have been
slippages in some sectors. The success in garnering private-sector investment in infrastructure through the public-private partnership (PPP) route during the Plan has laid solid foundation for a substantial step up in private-sector funding in coming years. PPPs are expected to augment resource availability as well as improve the efficiency of infrastructure service delivery.
The Planning Commission65, in its aproach paper has projected an investment of over Rs. 45 lakh crore (for about US $1 trilion) during the Twelfth Plan (2012–17). It is projected that at least 50 per cent of this investment will come from the private sector as against the 36 per cent anticipated in the Eleventh Plan and public sector investment will need to increase to over Rs. 22.5 lakh crore as against an expenditure of Rs. 13.1 lakh crore during the Eleventh Plan. Financing infrastructure will, therefore, be a big challenge in the coming years and will equire some innovative ideas and new models of financing.