{"id":8735,"date":"2012-11-14T15:29:21","date_gmt":"2012-11-14T09:59:21","guid":{"rendered":"http:\/\/www.greenworldinvestor.com\/?p=8735"},"modified":"2012-11-14T15:29:21","modified_gmt":"2012-11-14T09:59:21","slug":"india-infrastructure-strengthening-or-weakening-the-indian-economy","status":"publish","type":"post","link":"https:\/\/iiec-india.org\/greenworld\/2012\/11\/14\/india-infrastructure-strengthening-or-weakening-the-indian-economy\/","title":{"rendered":"India Infrastructure – Strengthening or Weakening the Indian Economy"},"content":{"rendered":"

Infrastructure: The roots of growth for emerging markets<\/h1>\n

\u201c<\/em>When you don’t invest in infrastructure, you are going to pay sooner or later<\/em>“<\/em><\/a><\/span><\/em><\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0 Mike Parker<\/em><\/p>\n

Infrastructure, in general, defined as the set of interconnected structural elements that provide framework supporting an entire structure of development.<\/em><\/strong><\/p>\n

<\/em><\/strong>A well-knit and coordinated system of transport plays an important role in the sustained economic growth of a country.\u00a0 It also helps a nation develop a stature in today\u2019s world where globalization is the buzzword. Evidence also suggests that creation of infrastructure, through its direct and indirect effects, has a significant impact on poverty reduction.<\/p>\n

Now when the need of infrastructure is defined, its working is a mandate to be discussed. To accelerate the pace of infrastructure development Government has taken the initiative and has started a host of projects and schemes with the sole motive to upgrade physical infrastructure in all crucial sectors.<\/p>\n

In the Indian context, though there has been some improvement in infrastructure development in transport, communication and energy sectors in recent years, there are still significant gaps that need to be bridged. The current economic slowdown provides an opportunity for countries like India that have a substantial degree of unmet infrastructure requirements. This is reinforced by the understanding that spending on infrastructure has large multiplier effects.<\/p>\n

Indian Economy<\/strong><\/h3>\n

Post Independence Era (1947-1975):<\/strong><\/h3>\n

Indian Economy was known to be an agrarian economy wherein the major part of the revenue, to an extent of 70%, was generated from the agriculture sector. The main objective of planning in India at this stage was to initiate a process of development which will raise living for a richer, more varied life. The sole problem of development of an under developed economy is one of utilizing the potential resources available to the community effectively. An underdeveloped economy is characterized by the co-existence of unutilized or underutilized manpower on the one hand and of unexploited natural resources on the other.<\/p>\n

Indian economy, post independence, was somewhat more focused towards increasing the investment<\/em> the reason being accounted to the fact that being a fresh, new economy freed from the British Raj it was necessary for the government to stabilize itself so as to control its economy in future. A somewhat low rate of capital formation might have been adequate for countries like the U.K. and the U.S.A., wherein the modern industrialization took root early. On the other side the under developed countries which make a late start have to aim at comparable development within a briefer period.<\/p>\n

The First Five Year Plan<\/em> involves an outlay on development by public authorities of around ` 2069 Crores over the period of 1951\u201456. The main considerations that have been taken into account are:<\/p>\n

    \n
  1. Need for initiating a process of development that will form the basis of the much larger effort needed in the future<\/li>\n
  2. Total resources likely to be available to the country for the purpose of development<\/li>\n<\/ol>\n
      \n
    1. The close relationship between the rates of development and the requirements of resources in the public and in the private sectors<\/li>\n
    2. The necessity of completing the schemes of development initiated by the Central and State Governments prior to the commencement of the Plan ; and<\/li>\n
    3. The need to correct the mal adjustments in the economy caused by the war and the partition.<\/li>\n<\/ol>\n

      Following the budgetary plan formulated by the Planning Commission, since its inception in the year 1950, for the year 1951-1956 which is the First Five Year Plan of and for the Indian Economy. It is seen from the chart that a major portion of the plan was focused on areas like agriculture and irrigation.<\/p>\n\n\n\n\n\n\n\n\n\n\n\n
      Sector<\/strong><\/td>\nAmount<\/strong><\/td>\n<\/tr>\n
      Agriculture<\/td>\n\n

      360<\/p>\n<\/td>\n<\/tr>\n

      Irrigation<\/td>\n\n

      561<\/p>\n<\/td>\n<\/tr>\n

      Transport and Communications<\/td>\n\n

      497<\/p>\n<\/td>\n<\/tr>\n

      Industry<\/td>\n\n

      173<\/p>\n<\/td>\n<\/tr>\n

      Social Services<\/td>\n\n

      339<\/p>\n<\/td>\n<\/tr>\n

      Rehabilitation<\/td>\n\n

      85<\/p>\n<\/td>\n<\/tr>\n

      Miscellaneous<\/td>\n\n

      51<\/p>\n<\/td>\n<\/tr>\n

      Total<\/strong><\/td>\n\n

      2066<\/strong><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

       <\/p>\n

       <\/p>\n

       <\/p>\n

       <\/p>\n

       <\/p>\n

       <\/p>\n

       <\/p>\n

       <\/p>\n

       <\/p>\n

      Table 1: Sector wise Plan for 1st<\/sup> Five Year Plan<\/em><\/p>\n

      \"\"<\/p>\n

      Chart 1: Sector wise Plan for 1st<\/sup> Five year Plan (Percentage wise)<\/em><\/p>\n

      Thus we can see that Indian economy was not focused into infrastructure development rather the development of the economy so as to ensure utmost utilization of the resources.<\/p>\n

      During the period of 1947-1965, the rate of growth of the Indian economy in the first three decades after independence was derisively referred to as the\u00a0Hindu rate of growth<\/a>\u00a0by economists, because of the unfavorable growth rate. Since 1965, after the number of revolution in\u00a0 the agricultural sector like the Green Revolution, Yellow Revolution or the White Revolution which enhanced the use of\u00a0high-yielding varieties of seeds<\/a>, increased\u00a0fertilisers<\/a>\u00a0and improved\u00a0irrigation<\/a>\u00a0facilities collectively contributed to the improved condition of agriculture by increasing crop productivity, crop patterns and strengthening forward and backward linkages between agriculture and industry.<\/p>\n

      Liberalization of Economy (1991)<\/strong><\/h3>\n

      Liberalization Period- Is it liberalized or Paralyzed?<\/strong><\/p>\n

      The major breakthrough in the economy came during the year 1991, when Dr. Manmohan Singh served as the Finance Minister and incorporated the Policy of Liberalization, Privatization and Globalization<\/strong>. In 1991, after India faced a\u00a0balance of payments\u00a0crisis, it had to pledge 67 tons of gold to\u00a0Union Bank of Switzerland\u00a0and\u00a0Bank of England\u00a0as part of a bailout deal with the\u00a0International Monetary Fund\u00a0(IMF). In addition to the bailout, IMF required Indian government to undertake a series of structural economic reforms. As a result of which, the government of\u00a0P. V. Narasimha Rao<\/a>\u00a0and finance minister\u00a0Manmohan Singh<\/a>\u00a0started breakthrough reforms.<\/p>\n

      The new\u00a0neo-liberal<\/a>\u00a0policies included<\/p>\n