Eradication of poverty has been a major objective of the Indian government in recent times. The base on which growth of the Indian economy is built is infrastructure, where India substantially lacks. However, in recent times in India reduction of poverty and enhanced economic growth has emerged as the main objectives of the government and infrastructural bottlenecks are seen as the major hurdle to achieve that objective. This article discusses those bottlenecks. It further discusses the pro-poor growth process and its linkage with infrastructural development and eradication of poverty. It also discusses the forward linkage between infrastructure and economy and its correlation with the reduction of poverty. Lastly, it suggests how infrastructure projects should be designed and regulated. And these projects should be coordinated with other concerns to alleviate poverty.
There is a huge gap in infrastructure in India. Infrastructural development includes development of roads, public transportation facilities, water systems, airports and other utilities. It encompasses all those services that contribute to the expansion of productive activities like agriculture and industry. It includes a myriad of services ranging from health services and education services to the supply of such needs as power, irrigation, communication, etc.
Investment in the field of infrastructure has been considerably less than it should be, weak governance and institutions in India has led to rampant corruption, uninformed public investment choices and poor maintenance. All of this has lowered infrastructural contribution to economic growth and diverting benefits to the destitute in the country. However in recent time it has been noted that there is wider recognition of infrastructural development in its eradication of poverty. It has been observed that good governance and a strong institutional framework could strengthen the linkage between infrastructure and reduction of poverty.
The importance of infrastructure as a tool for economic development and eradication of poverty is reflected in enhanced investment by the government and international agencies. In the arena of economic liberalisation and globalisation infrastructural development creates an enabling ambience for nations’ productivity, and has serious implications for reducing inequity and poverty. The prerequisite for social and economic development of any developing nation is enhanced quality of public infrastructure. All of this also contributes substantially in attracting foreign direct investment which in turn creates various employment opportunities. As indicated in various studies infrastructure capital positively impacts the economy’s growth rate and output in developing nations. This is a no brainer inference that it all of the schemes for formulated by Indian government pertaining to economic development are properly executed then lower strata of society would have access to varied range of basic infrastructure facilities e.g. clean water, sanitation) and that in turn would drive millions out of poverty and enhance their living standards.
Traditional understanding is that economic growth leads to reduction of poverty as it increases the income level of poor populace. This is referred to as the trickle-down effect of growth. In simpler words it means a top down approach where there is a flow of cash from the rich to the poor at a certain rate. So in this process the rich strata of society reap the economic growth advantages first and then subsequently it is received by the poor once the rich start spending their gains. But in recent times in India it has been seen that there is a significant shift in the poverty scholarship from trickle-down effect of growth to the idea of pro-poor growth. Pro-poor go growth simply in simpler words mean that a process of growth that enables the lower section of society to actively participate in and derive benefits from the economic activity, the assumption of this process is that no person in society should be deprived of basic minimum needs. Major facilitator of this pro-poor growth method is development of infrastructure and it has direct bearing on reduction of poverty in India.
Majority population in India has no access to roads, safe drinking water, proper sanitation facilities and modern communication services. In absence of all of these facilities, the poor has to heavily pay for time, money and health. Subsequently, recent policy announcements have focused more on infrastructure expansion and following pro- poor growth methods. In this backdrop it becomes of utmost important to explore the linkage between infrastructure and poverty in India and both Centre and state level. This pro-poor approach lays more emphasis on strengthening of community by providing low cost technology and enhancing user participation.
Infrastructure has twin-fold relationship with economic development. Firstly it enhances economic growth and secondly economic development provides impetus to infrastructural development.
This first forward linkage between the two is heavily dependent upon various factors. For instance when there is insufficient availability of infrastructure in sectors such as power, water, transport, etc, then it affects the supply of inputs in directly productive sectors such as agriculture and manufacturing sectors and thereby leads to under optimal utilization of assets in these sectors. Sub-standard quality of infrastructure discourages the private sector to invest or if they invest in complementary capital instead of productive capital i.e. provide their own infrastructure, thereby reducing returns on investment.
The development of infrastructure enhances productivity substantially. It is the gateway to modern technology in almost all sectors. Various studies have noted that infrastructure development and GDP growth are closely linked to each other, especially in developing nations. It contributes to the total value of around 6 % in low-income countries and 9% to 11% in high-income countries. Thus this forward linkage not only contributes to economic development, technology advancement and globalisation but also to poverty eradication.
Development in the field of infrastructure enhances economic growth through both the channels of supply and demand. It reduces production costs and transaction costs, diversifies the economy and increases access to modern technologies, raising the economic returns to labour. It substantially contributes to raising the standard of life and contributing to macroeconomic stability.
Infrastructure helps in enhancing the economy of a nation. It scales up private investments and enhances agricultural and industrial productivity. There are few bottlenecks in the Indian economy which affect poor people considerably by accumulation, lowering asset values, imposing high transaction costs and creating market failures. Infrastructural development helps in the elimination of these bottlenecks which in turn allow the poor populace of the nation to contribute to the growth of the nation via employment opportunities created by the development of infrastructural services.
Infrastructural development would also have a positive impact on the distributional effects of growth and income of the country. Better infrastructure facilities would help in enhanced participation of the poor populace in the growth process. Adequate infrastructure facilities could help in the reduction of poverty through health improvements for instance quality water and sanitation facilities would help in reducing the incidence of illness and this would have a direct bearing on an individual’s productivity. Infrastructural development in the transportation sector and water system would effectively increase the income of people.
Development of physical infrastructure like road services, transport and communication facilities help in easy flow of information provide geographic access for labour mobility and makes it easier to transport labour to places where there is shortage. Better infrastructure also ushers in Agro-industrial development. They bring with them outside influences and stimuli and result in profound changes in mentalities, attitudes, opportunities, and socio-economic structure, along with a rise in income levels. It not only positively impacts productive activities but also the development of social infrastructure that would attract quality teachers and doctors which in turn would expand learning and healthcare opportunities. This would not only increase productivity level but also the income level of people which helps in alleviating poverty.
China, for instance, had tremendous economic development since the 1980’s, its per capita income quadrupled. Various factors contributed to the development of China’s economy but one of the major factors which contributed was an investment in the field of infrastructure. China implemented a “ go west” strategy for developing coastal provinces, this involves developing a 625 kilometre railway from Chongqing to Huaihua, thereby increasing access to the Red Basin and its 120 million inhabitants. The development railways system increases transport efficiency which enhances economic growth and reduces poverty in the region. People in this region were benefited from enhanced trade, market integration, tourism, increased production etc.
The development of railway infrastructure in this area created employment opportunities for local people through labour contracts and the procurement of construction material. This development project in China not only reduced transporting distance but also diverted road traffic and made it more environmentally friendly hereby saving energy and reducing pollution.
As in the case of India, there has been significant failure to provide adequate infrastructure facilities and services which has negatively impacted low-income users. Insufficient investment, inadequate planning, poor maintenance and unsustainable sector governance are some of the reasons for the low development of infrastructure. Without major progress in infrastructural development, it would be almost impossible for India to reduce poverty.
The present reality of India alludes to the fact that the task of infrastructural development shouldn’t be just left to the government alone. The need of the hour is a policy providing strategies and mechanisms to encourage private sectors in infrastructure development. These mechanisms should also provide a more pragmatic way of ways of turning into tangible projects through the provision of adequate finance.
Henceforth there exists a strong linkage between infrastructural development and poverty reduction. Inadequate infrastructural facilities at the regional/district level negatively impact average living standard as well as income distribution of people thereby increasing the people falling below BPL. Availability of education and health facilities however leads to both lowering of poverty and convergence through reduced interpersonal inequality. The need of the hour is an infrastructural expansion for increasing living standards and reduction of poverty along with requisite attention to social infrastructure to bridge the gap in inequality of opportunities.
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BY – Anamta Khan | National Law University, Delhi