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CRISIL Young Thought Leader 2011

INDIA’S INFRASTRUCTURE – A BOON OR A BANE

Shantanu Kumar
Final Year, IRMA, Ahmedabad

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Executive Summary
“Infrastructure” has almost been a go-to word for anyone who is discussing about the ways of sustaining India’s economic growth, and with good reason. A casual look at the growth figures of the individual states shows the existence of a direct relationship between the quality of infrastructure and the performance of the state. The states with the best infrastructure attract businesses which creates employment which in turn helps their economy grow. This paper looks at the current scenario in some of the most important sectors and tries to compare it with countries which are widely known to be on the same economic trajectory, viz. Brazil, Russia, China and Mexico. The paper finds that although the progress has been slow, the government has made an attempt to kick start the investment in infrastructure either itself as in creation and maintenance of schools under “Sarva Shiksha Abhiyan” or through the PPP model as done in several highway projects. The issues arising due to poor infrastructure set India’s annual GDP growth back by as much as 1.5% - 2%. This paper shows that the government funding has remained almost constant in most sectors and their increase is unlikely owing to the high fiscal deficit. Hence it is the private investment which will have to fund the infrastructure projects. The government of India recognises this and the design of the twelfth five year plan seeks to foster private sector participation. Their participation backed by a strong political will to see the projects through is necessary if India hopes to maintain the growth rates that it has seen in the last decade and half.

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Introduction
The importance of sound infrastructure for India’s continued economic