Everything About Infrastructure | Infrastructure And Development | Economic And Social Infrastructure

INFRASTRUCTURE

Infrastructure refers to the support system of economic and social development of a country.

Imagine life in the absence of the means of transport and communication; imagine life in the absence of educational institutes, hospitals and nursing homes; imagine life in the absence of electricity or oil & diesel! Absence of these things would only drive us to the primitive age when production was just for subsistence. Production activity did not yield surplus for growth and development.

Infrastructure refers to support system of economic and social development of a country without which economic growth and social development would only remain to be primitive.

Economic and Social Infrastructure

Infrastructure is broadly categorised as:

1. economic infrastructure, and
2. social infrastructure.

(1). Economic Infrastructure: Economic infrastructure refers to such elements of support system (like power, transport and communication) which serve as a driving force for production activity in the economy.

Abundant availability of power supply would accelerate the pace of production activity in the economy; abundant means of transport would facilitate the movement of goods from producers to the consumers, abundant means of communication would facilitate exchange, and so on and so forth.

In the absence of economic infrastructure, it is virtually not possible to develop an efficient system of growth and development.

(2). Social Infrastructure: Social infrastructure refers to such elements of support system (like schools, colleges, hospitals and nursing homes) which serve as a driving force for social development of a country. Social development refers to human resource development. It occurs when there is healthy and efficient workforce in the country.

While economic infrastructure accelerates the process of growth in the economy, social infrastructure accelerates the process of human development in a country.

Indeed, economic growth is incomplete without human development. Accordingly, economic and social infrastructure are complementary to each other; one reinforces the other.

ECONOMIC AND SOCIAL INFRASTRUCTURE ARE INTERDEPENDENT TO EACH OTHER

• Economic and social infrastructure are reciprocal to each other.
• Economic infrastructure induces sources of energy, better means of transport and communication, besides efficient system of banking and finance.
• All these elements of economic change are an essential prerequisite of economic growth.
• However, these elements (of economic infrastructure) would not be of any use if the bulk of population of a country continues to be illiterate and suffers from disease and sickness. This points to the significance of social infrastructure.
• Economic infrastructure must be complemented with social infrastructure for growth and development of a country. 

 INFRASTRUCTURE AND DEVELOPMENT

Following observations highlight how exactly infrastructure contributes to the process of growth and development:

(1). Infrastructure Promotes Productivity:

1. Productivity in Primary Sector: Think of agricultural production without permanent means of irrigation. Agricultural production would then depend entirely on rainfall. Farmers would propagate the seed only if it rains. If the rainfall is deficient, sowing would also be deficient. It means that, in the absence of permanent means of irrigation (an important component of economic infrastructure), actual output in agriculture would remain lower than the attainable output (or the potential output).
2. Productivity in Secondary Sector: Think of industrial production without such sources of energy as coal, petroleum and electricity. Perhaps, industrial production would then depend upon wind energy as well as solar energy. However, these are still underdeveloped sources of energy Implying, low level of productivity.
3. Productivity in Tertiary Sector: Come to the tertiary sector. Let us consider tourism as a production activity. Can tourism be a productive activity in the absence of rapid means of transport and communication? Certainly not. In the absence of rapid means of transport and communication, tourism would perhaps, exist only as a hobby of the explorers like Columbus and Vasco da Gama.

Thus, across all sectors of economy (primary, secondary and tertiary sectors), high productivity is possible only when we have infrastructural facilities.

(2). Infrastructure Induced Investment

Infrastructure induces investment. Example: A developed network of highways would definitely induce investment across all sectors of the economy. Because, it facilitates efficient movement of goods and services across different region of the country. Infact, Infrastructure is the backbone of business investment.

(3). Infrastructure Generates Linkages in Production

Developed means of transport and communication, ample sources of energy along with good facilities of banking and insurance would generate inter-industrial linkages. It is a situation when expansion of one industry facilitates the expansion of the other industry in the economy. Accordingly, growth becomes a self-propelling activity of change.

Linkages in production refers to a situation when expansion of one industry facilitates the expansion of the other. Economic growth becomes a self-propelling activity of change, But, this is possible only when we have ample infrastructural facilities.

(4). Infrastructure Enhances Size of the Market 

We know, large-scale production is possible only when size of the market is large. Infrastructure enhances size of the market. It was with a view to expanding size of the market for the British products in India that a network that a network of railways was developed under the British Raj.

Means of transport are an important component of economic infrastructure. These means are central to the growth of the market, and growth of the market is central to growth of the economy.

(5). Infrastructure Enhances Ability to Work: 

Here, we are referring to social infrastructure. It includes educational and medical institutions. These institutions promote education, skill formation and healthcare. These are essential parameters to enhance the ability to work. Implying a rise in efficiency and therefore, a rise in productivity. Accordingly, growth process is accelerated.

(6). Infrastructure Facilitates Outsourcing

A country having a good infrastructure, emerges as a destination for outsourcing. India is emerging to be global destination for all call centres, study centres and medical tourism. It is owing largely to its sound system of social infrastructure.

(7). Infrastructure Induces FDI

FDI (Foreign Direct Investment) is instrumental in the growth process in less developed countries like India where domestic investment is very low. Since 1991 (when economic reforms were initiated), FDI infolw in the India economy has substantially increased, thanks to the expanding infrastructure.

Briefly, we can say that infrastructure is an meaningful determinant of growth and development of a country. It raises productivity of the factors of production, and induces investment in diverse areas of economic activity. It enhances size of the market and develops an economy as a global destination for outsourcing.