Singnificance of infrastructure devlopment in a growing economy like india
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Important Features of Infrastructure:
It is worthwhile to mention some distinctive features of infrastructure – First, the building of infrastructure requires large and lumpy investment and they contribute to output, after a long time that is their gestation period is quite long. Second, due to large overhead capital and lumpy investment, the significant economies of scale are found in most of them. Due to the significant economies of scale found in many infrastructure services, they have the characteristics of natural money. The third important feature of infrastructure facilities is they create externalities.
For example, building of rural roads will benefit agriculture as the farmers are able to sell their products in towns where they can get remunerative prices. Besides, they can get some inputs such as fertilizers, pesticides and other industrial products at relatively cheaper prices as their transport costs decline due to improved transportation. Power plants generate both positive and negative externalities. The construction of power plants produces electricity which is used for industrial helps production and commercial use and thereby helps in acceleration of economic growth. A power plant also produces negative externalities in the form of emission of pollutants, especially CO2.
The above feature of infrastructure means that competitive market system will not be able to achieve a socially optimal level of infrastructural services in most of the cases. Besides, in many of infrastructural facilities, there are significant economies of scale and therefore they have the features natural monopoly. In other words, we find market failure to achieve their socially optimal level.
Therefore, these infrastructural facilities are either built or run by the government and public sector enterprises or if private sector is permitted to make investment in them and run them, they need to be regulated by the government, so that they should not exploit the consumers. For example, the distribution of electricity which is an infrastructural service is being provided by two power Companies of Tata and Reliance in different regions of Delhi, the electricity rates and other charges are being regulated by an authority appointed by the government. Similarly, in telecommunication, which is another infrastructural service, various companies such as Airtel, Vodaphone, Idea, MTNL are providing this service of wireless telephony (i.e., mobile service) are being regulated by TRAI.
Importance of Infrastructure:
It needs to be emphasized that good quality infrastructure is important not only for faster economic growth but also to ensure inclusive growth. By inclusive growth we mean that benefits of growth are shared by the majority of the people of a country. Thus the inclusive growth will lead to the alleviation of poverty and reduction in income inequality in the country.
For example, micro, small and medium enterprises (MSME) are dispersed throughout the economy and production by them and their growth require access to quality and reliable infrastructure services to compete efficiently with large-scale enterprises which can often build some of their own infrastructure such as installing their own small power plants or generators. Besides, large-scale firms can even locate themselves near ports and near transport hubs where required infrastructure is available.
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It is worthwhile to mention some distinctive features of infrastructure – First, the building of infrastructure requires large and lumpy investment and they contribute to output, after a long time that is their gestation period is quite long. Second, due to large overhead capital and lumpy investment, the significant economies of scale are found in most of them. Due to the significant economies of scale found in many infrastructure services, they have the characteristics of natural money. The third important feature of infrastructure facilities is they create externalities.
For example, building of rural roads will benefit agriculture as the farmers are able to sell their products in towns where they can get remunerative prices. Besides, they can get some inputs such as fertilizers, pesticides and other industrial products at relatively cheaper prices as their transport costs decline due to improved transportation. Power plants generate both positive and negative externalities. The construction of power plants produces electricity which is used for industrial helps production and commercial use and thereby helps in acceleration of economic growth. A power plant also produces negative externalities in the form of emission of pollutants, especially CO2.
The above feature of infrastructure means that competitive market system will not be able to achieve a socially optimal level of infrastructural services in most of the cases. Besides, in many of infrastructural facilities, there are significant economies of scale and therefore they have the features natural monopoly. In other words, we find market failure to achieve their socially optimal level.
Therefore, these infrastructural facilities are either built or run by the government and public sector enterprises or if private sector is permitted to make investment in them and run them, they need to be regulated by the government, so that they should not exploit the consumers. For example, the distribution of electricity which is an infrastructural service is being provided by two power Companies of Tata and Reliance in different regions of Delhi, the electricity rates and other charges are being regulated by an authority appointed by the government. Similarly, in telecommunication, which is another infrastructural service, various companies such as Airtel, Vodaphone, Idea, MTNL are providing this service of wireless telephony (i.e., mobile service) are being regulated by TRAI.
Importance of Infrastructure:
It needs to be emphasized that good quality infrastructure is important not only for faster economic growth but also to ensure inclusive growth. By inclusive growth we mean that benefits of growth are shared by the majority of the people of a country. Thus the inclusive growth will lead to the alleviation of poverty and reduction in income inequality in the country.
For example, micro, small and medium enterprises (MSME) are dispersed throughout the economy and production by them and their growth require access to quality and reliable infrastructure services to compete efficiently with large-scale enterprises which can often build some of their own infrastructure such as installing their own small power plants or generators. Besides, large-scale firms can even locate themselves near ports and near transport hubs where required infrastructure is available.
I HOPE IT WILL BE HELPFUL TO YOU. MARK ME AS A BRAINLIEST. FOR GETTING BETTER ANSWER TO YOUR NEXT QUESTION.
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