2. Relation between Infrastructure & Economic Development

Infrastructure works both directly and indirectly on a number of determinants of economic development, such as follows:

♤ Increase in investment: It opens up possibilities of investment by making available a number of necessary inputs and services, opening up the size of the market as well as increasing the supply elasticity and efficiency of factors of production. Thus, adequate quantity, quality and reliability of infrastructure are key to the growth of any economy. For example, the development of agriculture to a considerable extent depends on infrastructure - development of irrigation, power credit, transportation, marketing, education and training, research and development and other facilities.

♤ Industrial development: It also depends on a sound infrastructure base to a large extent.

♤ Employment generation: Infrastructure plays a significant role in the generation of employment opportunities. They improve mobility, productivity and efficiency of labour.

♤ Trade & commerce: Infrastructure facilities play a vital role in the development of trade and commerce. In fact they act as a platform for the expansion of trade and other commercial activities at a rapid speed.

Thus, infrastructure development can have a significant impact on economic growth. For low- income countries basic infrastructure such as water, irrigation and to lesser extent transport are important. As the economies mature into middle-income category, the share of power and transport and telecommunications in infrastructure and investment increases. Also, infrastructure not only contributes towards the development of backward regions and removal of regional imbalance but also acts as an instrument of social change. Extensive studies undertaken by the World Bank show that 1% increase in investment in the stock of infrastructure leads to a corresponding 1% increase in the Gross Domestic Product of a nation.