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Infrastructure for Sustainable Growth: A Demand Projection Exercise for India

Majumder, Rajarshi (2008): Infrastructure for Sustainable Growth: A Demand Projection Exercise for India. Published in: Journal of Quantitative Economics , Vol. 5, No. 2 (December 2007)


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Critical precondition for attaining growth and sustainable development is availability of a host of infrastructural facilities in adequate quantity and of reliable quality. The association between the latter and growth is well documented and a large number of theoretical propositions conclude that the association is quite strong and runs from the former to the latter. India, on attaining independence, accorded highest importance to the development of infrastructural facilities and lion’s share of the plan outlays were on this sector. This resulted in a remarkable growth in such facilities. But the recent spurt in actual and target growth rates has been associated with substantial shortages in the physical availability of infrastructural facilities. To achieve and sustain the growth targets such shortages must be removed. This should start with determining the likely demand for these facilities both at current levels of economic intensity and at levels corresponding to desired growth rates. In this paper we seek to forecast the demand for selected infrastructural facilities for India over the next decade and a half so that we have an idea regarding the magnitude of the task facing the economy. In addition to projecting physical quantum of demand for those facilities, we also attempt at indicating the financial implications of realising those levels. The projected demand is substantially larger than the present availability and the task becomes harder as not only population will rise in future but the per capita demand would also increase. The Capacity Addition required would call in for huge investment amounting to a Capital outlay of 6-6.2 per cent of GDP for the five selected sectors only. One possible way to dent into this awesome job is to use a dual strategy. Along with heavy investment in creation of new physical stock of infrastructural facilities, one must also aim at improving the utilization rate and operational efficiency of existing stock.

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