39

CHAPTER-II

INFRASTRUCTURE AND ECONOMIC DEVELOPMENT-A

CONCEPTUAL CLEARIFICATION

2.1 INTRODUCTION:

The role of infrastructure in spearheading economic development of a

country and also setting its pace can hardly be over emphasized. Like a

foundation in an edifice, the place of infrastructure as well as its soundness,

are crucial to the nations total development. The economic growth of a

country has evidently happened hand in hand with the development of its

infrastructure. To quote famous economist Dr. V.K.R.V. Rao, “the link

between infrastructure and development is not a once for all affair. It is

a continuous process and progress in development has to be preceded

accompanied and followed by progress in infrastructure, if we are to

fulfill our declared objectives of a self-accelerating process of economic

development”.

A sound infrastructural foundation is the key to the overall socio-

economic development of a state. This acts as a magnet for attracting

additional investment into a state and thus provides a competitive edge to it

over other states. Availability of adequate and efficient infrastructural set up

not only promotes rapid industrialization but also improves the quality of life

of the people. The all pervading importance of infrastructure would be more

clear from the fact that it encompasses the whole spectrum of vital services

such as roads, railways, civil aviation, shipping, power generation

transmission, telecommunications, postal facilities and urban development.

Adequate infrastructure facilities are an absolute necessity for rapid

achievement of sustainable economic growth. Infrastructure facilities are like

wheels of development without which the economy cannot function

properly.

40

2.2 ORIGIN AND MEANING:

The term ‘INFRASTRUCTURE’ seems to have originated in 19th

century in France and till the first half of the 20th

Century it was used to refer

primarily to military installation. The term has been used since 1927 to refer

collectively to the roads, bridges, railways and similar public works that are

required for an industrial economy, or a portion of it to function. The new

era of American infrastructure started during the great depression of 1929. In

1932 Americans elected a president and congress that believed in an active

role for the federal government in creating jobs for the unemployed

Americans. Within the framework of a newly coined economic theory in

macro economics by J. M. Keynes, the new president started with a modest

list of infrastructure projects such as federal administrative buildings. He

soon extended the enterprise to railway stations, bus stands, post office

buildings, irrigation projects, road repairing and expansion, hydroelectric

dams, rural electrification. Following the example of the federal government,

many states initiated plans for infrastructure systems in their territories.

Infrastructure facilities grew in leaps and bounds. The intervention of the

Second World War interrupted this stream of initiatives through out the

country. But at the same time, additional infrastructure components were

added as new airports, new towns and new harbors appeared on the map as a

result of war effect.

The concept of ‘infrastructure’ or ‘overhead capital’ was first used by

H.W. Singer.1 He identified it with various kinds of investments which are

not directly productive but they help in fostering development process.

Examples of such investments are transport, power and irrigation. Ragnar

Nurkse2 and Gunnar Myrdal have also recognized the importance of

1. H.W. Singer, “Development Projects as part of National Development Programme:, in

Formulation and Appraisal of Development Porjects, 1951.

2. Ragner Nurkse “Problems of Capital Formation in Underdeveloped Countries”- Oxford-

1955

41

infrastructure. Singer Nurkse, and Myrdal’s concept of social overhead

capital encompasses transport facilities, public utilities, training schemes,

railways, power plants and water works. However, the term came to main

stream in entire United States during 1980’s following publication of

“America in Ruins” written by Choate and Walter in 1981, which initiated

a public policy discussion of nations “infrastructure crisis” purported to be

caused by decades of inadequate investment and poor maintenance of public

facilities.

The term infrastructure literally means structure below, i.e. the

foundation. The word is a combination of “infra” and “structure”.

Infrastructure is generally a set of interconnected structural elements that

provide the framework supporting an entire structure. It refers to some kind

of permanent installations, which are used over a long period of time. The

term has diverse meanings in different fields, but is perhaps most widely

understood to refer to the fundamental facilities and systems serving a

country, city or area such as transport and communication system, water and

power lines, schools, hospitals etc. Economically, Infrastructure would be

seen to be the structural elements of an economy which allows for

production of goods and services without themselves being part of the

production process.

2.3 DEFINITIONS:

The Readers Digest Universal Dictionary defines the term

infrastructure as “an underlying base or supporting structure, the basic

facilities, equipment, services and installations needed for the growth and

functioning of a country, community, operation or organization”.

The Infrastructure Development Department (IDD) of Government of

Karnataka defines the term ‘infrastructure’ as “any public work relating to

42

facilities for utilization of natural resources or provision of services, by way

of Physical structures or systems”.

Infrastructure is generally defined as the Physical framework of

facilities through which goods and services are provided to the public. Its

linkages to the economy are multiple and complex, because it affects

production and consumption directly, creates positive and negative spillover

effects, and involves large flow of expenditure3.

Thus, infrastructure refers to those basic facilities without which

primary, secondary and tertiary productive activities cannot function. It is a

sine-qua-non of economic development.

While Infrastructure is recognized as a crucial input for economic

development, there is no clear definition of infrastructure according to the

current usage of the term in India. For policy formulation, setting of sectoral

targets and monitoring projects, a clear understanding of what is covered

under the rubric of ‘infrastructure’ is necessary to ensure consistency and

comparability in the data collected and reported by various agencies over

time. The National Statistical Commission headed by Dr. C. Rangarajan,

attempted to identify infrastructure based on some characteristics.

This Note compiles definition of infrastructure from various reports/

notifications of different agencies and concludes with decision taken by the

Empowered Sub-Committee of the Committee on Infrastructure on this

subject in the meetings held on 11th January, 2008 and 2

nd April, 2008 under

the chairmanship of Deputy Chairman, Planning Commission.

Dr. C. Rangarajan Commission’s Notion of Infrastructure (2001):

The Rangarajan Commission indicated six characteristics of

infrastructure sectors, (a) Natural monopoly, (b) High-sunk costs, (c) Non-

tradability of output, (d) Non-rivalness (up to congestion limits) in

consumption, (e) Possibility of price exclusion, and (f) Bestowing

externalities on society. Based on these features (except b,d and e), the

3. K. Narindar Jetli and Vishal Sethi – “Infrastructure Development in India – Post

Liberalisation Initiatives and Challenges” – New Century Publications, New Delhi.

43

Commission recommended inclusion of following in infrastructure in the

first stage:

Railway tracks, signaling system, stations

Roads, bridges, runways and other airport facilities.

T and D of electricity

Telephone lines, telecommunications network

Pipelines for water, crude oil, slurry, waterways, port facilities

Canal networks for irrigation, sanitation or sewerage.

The Commission further recommended that considering characteristics (b),

(d) and (e) also, the above list may be extended to include the following in

the second stage:

Rolling stock on railways

Vehicles, aircrafts

Power generating plants

Production of crude oil, purification of water

Ships and other vessels

However, the Rangarajan Commission recommended that the list of

infrastructure activities should be finalized by the Ministry of Statistics and

Programme Implementation (MOSPI) on the basis on the characterists

recommended by them for identification of infrastructure.

Dr. Rakesh Mohan Committee Report (1996) and the Central Statistical

Organisation (CSO):

Dr. Rakesh Mohan Committee in “The India Infrastructure Report”

included Electricity, gas, water supply, telecom, roads, industrial parks,

railways, ports, airports, urban infrastructure and storage as infrastructure.

44

Except industrial parks and urban infrastructure, all these sub-sectors are

treated by CSO also as infrastructure.

Reserve Bank of India (RBI) circular on Definition of Infrastructure:

As per the RBI, a credit facility is treated as “infrastructure lending” to

a borrower company which is engaged in developing, operating and

maintaining or developing, operating and maintaining any infrastructure

facility that is a project in any of the following sectors, or any infrastructure

facility of a similar nature;

i) a road, including toll road, a bridge or a rail system;

ii) a highway project including other activities being an integral part

of the highway project;

iii) a port, airport, inland waterway or inland port;

iv) a water supply project, irrigation project, water treatment system,

sanitation and sewerage system or solid waste management system;

v) telecommunication services whether basic or cellular, including

ratio paging, domestic satellite service (i.e. a satellite owned and

operated by an Indian company for providing telecommunication

service), network of trunking, broadband network and internet

services;

vi) an industrial park or special economic zone;

vii) generation or generation and distribution of power;

viii) transmission or distribution of power by laying a network of new

transmission or distribution lines;

ix) construction relating to projects involving agro-processing and

supply of inputs to agriculture;

x) construction for preservation and storage of processed agro-

products, perishable goods such as fruits, vegetables and flowers

including testing facilities for quality;

45

xi) construction of educational institutions and hospitals;

xii) any other infrastructure facility of similar nature.

For raising external commercial borrowings funds, the RBI has

defined infrastructure to include (i) power, (ii) telecommunication, (iii)

railways, (iv) road including bridges, (v) sea port and airport, (vi) industrial

parks and (vii) urban infrastructure (water supply, sanitation and sewage

projects) vide their circular dated 2nd

July, 2007.

Insurance Regulatory and Development Authority (IRDA)

The IRDA (Registration of India Insurance Companies) (Second

Amendment) Regulation, 2008 defined infrastructure to include followings:

(i) Road, including toll road, bridges or a rail system.

(ii) Highway projects including other activities being integral part of

the highway project.

(iii) Port, airport, inland waterways or inland port.

(iv) Water supply project, irrigation project, water treatment system,

sanitation and sewerage system or solid waster management

system.

(v) Telecommunication services whether basic or cellular including

ratio paging, domestic satellite services (i.e. a satellite owned and

operated by an Indian company for providing telecommunication

services), network of trunking, broadband network and internet

services.

(vi) An industrial park or special economic zone.

(vii) Generation or generation and distribution of power.

(viii) Transmission or distribution of power by laying a network of new

transmission or distribution lines.

46

(ix) Construction for preservation and storage of processed agro-

products, perishable goods such as fruits, vegetables and flowers

including testing facilities for quality.

(x) Construction of educational institutions and hospitals

(xi) Any other public facility of similar nature as may be notified by the

authority in this behalf in the Official Gazette.

Income Tax Department:

For an infrastructure company, section 80-IA of the Income Tax

allows deduction of 100% profit from its income during initial 5 years of

operation and then 30% deduction of profit from income during another 5

years. For this purpose infrastructure covers electricity, water supply,

sewerage, telecom, roads & bridges, ports, airports, railways, irrigation,

storage (at ports) and industrial parks/SEZ.

World Bank:

The World Bank treats power, water supply, sewerage,

communication, roads & bridges, ports, airports, railways, housing, urban

services, oil/gas production and mining sectors as infrastructure.

Economic Survey:

The Economic Survey considers power, urban services,

telecommunications, posts, roads, ports, civil aviation and railways under

infrastructure sector.

Decision of the Empowered Sub-Committee of the Committee on

Infrastructure on definition of infrastructure:

The Empowered Sub-Committee of the Committee on Infrastructure

in its meetings held on 11th

January, 2008 and 2nd

April, 2008 under the

47

chairmanship of Deputy Chairman, Planning Commission discussed the

subject matter. There was consensus on including the following in the broad

definition of infrastructure:

i) Electricity (including generation, transmission and distribution) and R

and M of power stations,

ii) Non-Conventional Energy (including wind energy and solar energy),

iii) Water supply and sanitation (including solid waste management,

drainage and sewerage) and street lighting,

iv) Telecommunications,

v) Roads and bridges

vi) Ports,

vii) Inland waterways,

viii) Airports

ix) Railways (including rolling stock and mass transit system),

x) Irrigation (including watershed development),

xi) Storage,

xii) Oil and gas pipeline networks.

A Comparative Table on definition of Infrastructure sector and

decision of the Empowered Sub-Committee of Committee on Infrastructure

(Col) is given below:

Table 2.1 Infrastructure sector and Decision of the Empowered Sub-

Committee On Infrastructure (COI).

Sector Rangaragan

Commission

Rakesh

Mohan

report/CSO

RBI Income

tax

IRDA Ministry

of Finance

Survey

World

Bank

Decision of the

empowered

sub-committee

of CoI

Electricity Yes Yes Yes Yes Yes Yes Yes Yes (incl. R &

M of power

stations)

Water

Supply

Yes Yes Yes Yes Yes Yes Yes Yes

48

Sewerage Yes Yes Yes Yes Yes Yes Yes (incl.

SWM and

street lighting)

Telecommu

nications

Yes Yes Yes Yes Yes Yes Yes Yes

Roads &

Bridges

Yes Yes Yes Yes Yes Yes Yes Yes

Ports Yes Yes Yes Yes Yes Yes Yes Yes (incl.

Inland

waterways)

Airports Yes Yes Yes Yes Yes Yes Yes Yes

Rail

(rolling

Stock)

Yes Yes Yes Yes Yes Yes Yes Yes

Railways Yes Yes Yes Yes Yes Yes Yes Yes (incl.

MTS)

Wind

Energy

Yes (CSO) Yes (incl.

Solar Energy)

Irrigation Yes Yes Yes Yes Yes Yes (incl.

watershed

Development)

Storage Yes Yes Yes (at

ports)

Yes Yes

Housing Yes

Urban

Services; as

Street

lighting,

Solid

Waste

Manageme

nt (SWM)

Yes (Rakesh

Mohan),

No(CSO)

Yes Yes

(SW

M)

Yes Yes

Oil

production

pipe lines

Yes Yes Yes (oil

pipelines only)

Mining Yes

Gas

distribution

Yes Yes Yes (gas

pipelines only)

Aircrafts Yes Yes

Vehicles,

trucks,

buses etc.

(Road

Transport

System)

Yes Yes

Industrial

Park/SEZ

Yes (RM),

No (CSO)

Yes Yes Yes

Educational

Institutions

Yes Yes

Hospitals Yes Yes

Posts Yes

49

2.4 RELATION BETWEEN INFRASTRUCTURE AND ECONOMIC

DEVELOPMENT:

Infrastructure considerably affects the economic development of a

country. A number of interchangeable terms such as, “social overhead”,

“overhead capital” basic economic facilities, etc have been used to denote

services which are generally identified with infrastructure. In recent years the

term ‘infrastructure’ has been used more frequently in literature of economic

development and is often qualified by a prefix such as ‘economic’ or ‘social’

to distinguish different types of infrastructure. Historical records corroborate

the fact that the countries or regions which have industrilised rapidly had

well developed infrastructure. If the infrastructure of an economy is stronger,

one can build up the super structure without much difficulty. The

development history of all countries clearly tells us that unless the

infrastructure is built on sound lines, it is not possible to achieve rapid

economic development.

“A fast growing economy like ours requires infrastructure of truly

world class. This would also promote global competitive efficiency as a

major thrust area. The infrastructure needs have to keep pace with the

burgeoning needs of the different sectors of economy. The widening chasm

between rural and urban infrastructure is a core area of development”.4

Development of rural infrastructure including safe-drinking water, roads,

housing, health-care, sanitation, etc is a necessary prerequisite for the

accelerated growth of the rural areas.

A robust economy needs a robust infrastructure. Infrastructure being a

sine qua-non of economic development, its development is not a luxury but a

necessity. Infrastructure development is of two types-demand driven or

supply driven. For example, in the context of congested urban areas there is

a demand for by passes and bridges and when by passes are constructed or

4. K.Ranga Reddy, Amitabh Ray and Prem Singh – “Infrastructure Status and Policy Options”-

Planning Commission New Delhi.

50

bridges are made it is because there is a demand for it. On the other hand in

the construction of express ways, which are meant to cater to fast moving

traffic and to the requirements of the industrialists and traders who are

willing to pay more for better service, we would say that their construction is

supply driven. These facilities are made available and those who need it use

it. Demand driven infrastructure is a must for development whereas supply

driven infrastructure is one which is desirable but not a must. Normally

infrastructure develops at a slow pace as it is given least importance in the

early stages of economic growth.

Infrastructure works directly and indirectly on a number of

determinants of economic development. On the demand side, it opens up

possibilities of investment by making available a number of necessary inputs

and services, opening up the size of the market as well as increasing the

supply elasticity and efficiency of factors of production. On the supply side

also the development of infrastructure helps in mobilizing potential saving

and channelising them into productive investment. Adequate quantity,

quality and reliability of infrastructure are key to the growth of any

economy. Importance of infrastructure has been generally taken as self-

evident. It has been repeatedly emphasized that availability of infrastructure

is a necessary precondition of development. “The function of infrastructure

is to release latent productivity in the factors of production singly and in co-

ordination and bring about not only an increase in the output of individual

factors and units of production but also mutually additive effect through co-

ordination in inputs, output, space and time and thus maximize the overall

rate of economic growth”.5

The relationship between infrastructure and economic development

may be analysed by focusing on its impact on the basic determinants of

5. Dr. V.K.R.V. Rao- Cit. “Issues in Economic Development” by Sher Singh Somra – RBSA

Publishers, Jaipur P. 179.

51

development particularly through its links with capital formation and

technological change. The phase at which the economic development takes

place depends mainly on the level of infrastructure. The strong positive

correlation between the level of infrastructure and the economic

development has been a well established fact in the development economics

literature. In Keynesian macro economic model, the income or output in the

economy derives also from the level of investment made in the economy. It

should be noted that out of all the four factors contributing to income of a

nation, namely, consumption expenditure, investment expenditure,

government expenditure and net income from abroad, income from

investment comes from government spending. Though the income in the

Keynesian model6

refers to short-term income, usually measured on annual

basis, the investment made also includes long-term investment such as

investment in basic infrastructural facilities. Since the model is based on the

notion that there is a direct positive correlation between income and the

investment, investment in infrastructure is economically justified. The

expansion and improvement of the infrastructure is a necessary pre-condition

for capital formation and increase in the production and productivity7.

The development of agriculture to a considerable extent depends on

infrastructure. Development of irrigation, power credit, transport marketing,

education and training research and development and other facilities

contribute a lot to the development of agriculture. Industrial development

also to a large extent depends on the sound infrastructure base. Infrastructure

plays a significant role in the generation of employment opportunities. They

improve mobility, productivity and efficiency of labour. Infrastructure

facilities play a vital role in the development of trade and commerce. In fact

they act as a platform for the expansion of trade and other commercial

activities at a rapid speed.

6. J.M. Keynes, Cit. “Economic Development” by M.L. Jingen

7. W.W. Rostow-Stages of Economic Growth

52

Proper and adequate infrastructure is of utmost importance for the

defence of the nation. For instance, transport and communication, scientific

inventions play an important role in national defence. An old adage says, “to

be prepared for the war is one of the best ways of preserving peace”.

Therefore it is apt for any nation to give due importance for the national

defence for which adequate infrastructure is a foundation.

The infrastructure development can have a significant impact on

economic growth. For low income countries basic infrastructure such as

water, irrigation and to lesser extent transport are important. As the

economies mature into a middle income category the share of power and

transport and telecommunications in infrastructure and investment

increases.8

The infrastructure sector covers a wide spectrum of services inter-alias

roadways, railways, airways and water transport services, power generation

including the transmission and distribution thereof telecommunications, port

handling facilities, water supply and sewerage disposal, mass transport

systems, and other elements of social infrastructure including medical and

educational facilities and other primary services. While some of these sectors

have direct impact on the workings of the economy others are important

from the societal point of view and therefore need to be developed on a

concurrent basis.

Infrastructure contributes a lot for the development of backward

regions and removal of regional imbalance. Infrastructure facilities act as an

instrument of social change. Development of industry, transport facilities,

education, science and technology, growth of towns and cities etc may

change the very outlook of the society. The pressing need of keeping pace

with the globalised scenario and the increasing progress of technological

8. World Development Report 1994, World Bank.

53

INVESTMENT IN INFRASTRUCTURE IN INDIA

2.7

2.35

2.04

1.61

1.441.451.451.28

0

0.5

1

1.5

2

2.5

3

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

YEAR

AM

OU

NT

(R

S. L

AK

H C

RO

RE

)

innovations, coupled with paucity of much needed resources and innovations

in the country highlights the need for better infrastructure. The World Bank

said-“Infrastructure could deliver major benefits in economic growth,

poverty alleviation and environmental sustainability”. Infrastructure, also

referred to as ‘social overhead capital’, renders service to the common man

and has direct interface in determining the quality of life in terms of facilities

he enjoys namely, water and sanitation facilities, housing, transport and

communication, power, health, education etc. Thus infrastructure plays a

pivotal role in influencing the level and nature of economic and social

activities in a country. Extensive studies undertaken by the World Bank

showes that 1% increase in investment in the stock of infrastructure

leads to a corresponding 1% increase in the Gross Domestic Product of

a nation.”

Figure 2.1 Investment in Infrastructure9.

9. Ravi Mittal – “Private Participation in Infrastructure Sector in India”. Published in YOJANA

a Development Monthly July-2009.

54

INFRASTRUCTURE INVESTMENT AS A PERCENT

OF GDP

65.75.3

4.74.5

4.95.14.8

0

1

2

3

4

5

6

7

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

YEAR

PE

RC

EN

TA

GE

OF

GD

P

Figure 2.2 Infrastructure Investments as a Percentage of GDP10

.

Experience world wide indicates that the purpose of industrialization

is better served in the presence of efficient infrastructure than in its absence.

Unfortunately, the infrastructure services enjoyed by the developing

countries are abysmally low compared to developed countries. Therefore the

developing countries should augment their infrastructure to achieve overall

development of the country. Good infrastructure raises productivity and

lowers cost of production and ultimately leads to better standard of living.

Therefore, infrastructure may be considered as the WHEELS of the

ECONOMY.

10. Ravi Mittal – “Private Participation in Infrastructure Sector in India”. Published in

YOJANA a Development Monthly July-2009.

55

2.5 TYPES OF INFRASTRUCTURE:

There is no unanimity of opinion among developmental economists

with regard to the items to be included in infrastructure. A large number of

items extending from transport and power to education, law and order and

social values have been included in infrastructure given by various

economists.

Singer11

has included education system, health services, housing,

transport, power and irrigation among over head capital.

Ragnar Nurskse12

identifies these activities as “public activities,

transport facilities, training schemes, water works, power plants, hospitals,

schools and various basic services”.

To North13

, banking, insurance, postal facilities, warehousing, the

development of distribution system for imports development of roads and

turnpikes are included as social overhead investment”.

Arthur Lewis14

has used the term infrastructure in a wider sense

covering economic, social and administrative services in it. He includes in

addition to ports, electricity, motor transport, irrigation and drainage scheme,

Government department concerned with discovering new sources and better

ways of utilizing known resources, such as departments of agriculture,

industry and economic research. Lewis observed that ‘a good civil service’ is

a crucial part of the infrastructure’, since the quality of other public services

will depend upon the quality of civil services.

Rostow15

has identified infrastructure with transport services, literate

and technically trained personnel, power resources and adequate flow of

working capital.

11. Singer H.W. – OP.Cit, 1951, P 7

12. Nurkse Ragnar ‘Problems of Capital Formation in Under Developed Countries’, Oxford,

London, 1955, P 152

13. North DC- ‘Industrialization in United States’ (1859-60), in Rostow W.W. (Ed) ‘The

Economics of Take-off into self-sustained Growth’, MacMillan, London, 1944, P 97-102.

14. Lewis W.A. – ‘Development Planning, the Essentials of Economic Policy’ George Allen and

Unwin, London 1966.

15. Rostow W.W. OP. Cit, 1964 P. XXV

56

According to Hirschman16

the ‘hardcore’ infrastructure includes the

basic sectors like, transport and power but in a broader concept of

infrastructure he has included law and order, education, public health,

transport, communication, power, water supply, irrigation as well as

drainage system.

Shah17

has categorized it under eight different heads such as power,

irrigation, transport, communication, education, research and development,

health and other facilities including law and order as part of infrastructure.

A very broad and comprehensive picture of components of

infrastructure is observed in the analysis provided by Dr. V.K.R.V. Rao18

.

The various components included in infrastructure in his analysis are as

follows:

Economic Infrastructure:

1. Transport:

Roads

Railways

Shipping ports and harbours

Airports

Transport Equipments.

2. Communication:

a. Ports

b. Telegraphs

c. Telephones

d. Radio

e. Television

f. Cinema etc

16. Hirschaman A.O. OP Cit, 1958, P 83

17. Shah N. – ‘Infrastructure for Indian Economy’ Commerce Annual No. 3061, Vol 119,

1969, P.9

18. Rao V.K.R.V, - ‘Investment Income and Multiplies in an under Developed Economy’ in

Agarwala A.N. and Singh S.P. (Ed) ‘The Economics of Underdevelopment’ Oxford

University Press, Bombay, 1968, P.9

57

3. Energy/Power:

a. Coal

b. Electricity

c. Wind power

d. Solar energy

e. Oil

f. Gas and Bio-gas

4. Intermediate goods and output:

a. Minerals

b. Steel

c. Metals other than steel

d. Basic chemicals

e. Fertilizers and pesticides

f. Machinery and machine tools

5. Increasing productivity of natural resources:

a. Reclamation of land

b. Irrigation (Major/Medium/Minor)

c. Drainage

d. Contour building and land reshaping.

e. Consolidation of holdings

f. High yielding bovine varieties

g. Fishing boats

h. Fishing equipments and refrigeration

i. Afforestation and development of commercial projects.

6. Science and Technology:

a. Teaching basic and applied research

b. National laboratories

c. Liaison with production units

58

7. Information system:

a. Mass Media

b. Libraries and Museums

c. Fairs and exhibitions

d. Books and journals.

Finance Infrastructure:

i. Finance and Banking

a. Savings institutions (public private and co-operative sectors)

b. Credit and lending institutions.

c. Capital Markets

Social Infrastructure:

1. Human Resource Development:

a. Health

b. Clean drinking water

c. Disease eradication

d. Public hygiene

e. Family Planning

f. Medical facilities

g. Education, Literacy

h. Schools, Colleges and Universities

i. Professional Education

j. Technical and industrial schools

k. Development disciplines

Thus, the scope of infrastructure is growing rapidly over time. The

items to be covered in the term infrastructure are rather difficult. They differ

from country to country depending on the level of economic development. A

country may go in for broader base of infrastructure development as

development proceeds over the time periods.

59

Infrastructure is also classified into different categories based on the

purpose of the study. It is classified as ‘hard’ and ‘soft’ infrastructure,

development and rehabilitative infrastructure (on the basis of stages of

development) urban and rural infrastructure and institutional and non-

institutional infrastructure19

.

In the economic category all these facilities are included which are

directly required for the process of development of productive activities.

They are mainly

i. Irrigation

ii. Power

iii. Transport and

iv. Communication

On the other hand the term ‘social infrastructure’ refers to those

overhead facilities which lead to the improvement in the quality of the

population. These may include facilities like,

1. Health Services

2. Educational facilities.

3. Provision of nutrition

4. Water supply (Clean drinking water)

5. Sanitation etc

Rural and urban Infrastructure:

While the overhead facilities serve the needs of economy in general

and the same facility may be used by different sectors, it may

be used to distinguish between facilities which primarily cater to specific

sectors or segments of the economy. On the basis of this, infrastructure may

19. Rosenstein Rodan P.N. – ‘The Big Push Argument’ in Meier G. M. (Ed), Leading Issues in

Development Economics, Oxford University Press, 1964, P. 431-436

60

be classified as rural and urban infrastructure. But the distinction is not a

water-tight compartment, it is over-lapping. For example, irrigation facilities

primarily serve the agricultural sector, but the training facilities required by

industry and agriculture would be of different types. Similarly credit,

marketing or warehousing services are commonly needed by both the sectors

while the specific type of these services differ from one to another. In our

country generally these services are being provided by co-operative societies

in rural area and in urban areas these services are provided by some private

and public institutions. To find out the growth in different sectors of the

economy it would be appropriate to take into account the infrastructure

specific to the sector rather than overall development of infrastructure.

Institutional and non-institutional infrastructure:

The recent tendency has been towards an enlargement of concept of

infrastructure including various items like law and order, administrative and

extension agencies, financial organization etc. In this connection it is

appropriate to draw a distinction between institutional and non-institutional

infrastructure. The Governments of developing countries have been taking

increasingly the responsibility of creating a number of institutions or

organizations to promote the pace of development. These include the

financial institutions and extension agencies as well as marketing and

general administration. Many of these developmental institutions fulfill most

of the criteria of infrastructure. The Provision of other types of overhead

facilities may be included among non-institutional infrastructure.

These various types of classification of infrastructure have their own

merits and limitations and they are of specific use in different kinds of

studies. For the purpose of present study, only a few aspects of economic

and social infrastructure which are most common in use are being

considered.

61

In the present study the researcher has made an attempt to analyse the

following components of infrastructure.

Infrastructure

Economic Infrastructure Social Infrastructure

Transport and Communication Education

Energy Health

Banking

Cooperatives

Irrigation

2.6 TRANSPORT AND COMMUNICATION:

Transport an important component of the tertiary sector is of immense

significance in a country’s economic development. With the advancements,

complexities and sophistications of the modern world, a country cannot think

of attaining economic prosperity in the absence of a rapid development of

the transport sector. Transport is an essential economic infrastructure for the

rapid development of any region. The lack of transport facilities retards the

process of economic development even if a region is endowed with rich

natural resources. Transport has been recognized as an indispensable

ingredient of a country’s overall development.

Alfred Marshall defines transport as a “mere movement of persons and

things from one place to another”20

Frank H. Mossman and Newton Morton defines Transport as “a

service or facility which creates time and place utility through the physical

transfer of persons and goods from on location to another”21

20. Marshall, Alfred Industry and Trade, London 1921 Page 423 21. Frank H Mossman and Newton Morton, ‘principles of Transportation, New York, 1957, P.3.

2

62

According to the Encyclopedia of social sciences “the transport

system is the culmination of all technical instruments and organizations

designed to enable persons, commodities and news to master space.”22

Therefore, transport can be referred to as a process of moving people

and goods from one place to another with some predetermined objective.

Transport in the modern world, may assume different forms like road

transport, railway transport, water transport and air transport. Transport is

indispensable for the economic development of country. It occupies a pivot

place in the economic development process. It has been often remarked “if

agriculture and industry are regarded as the body and bones of the economy,

transport and communication constitutes its nerves”.

Road Transport:

Road transport is one of the oldest forms of the transport system. It

plays a decisive role in the economic development of a country. Because of

its flexibility of operations and the prevalent opportunities to render door-to-

door service, road transport is the only means of transport available to a

majority of the rural people in India. The seventh plan draft clearly outlined

the importance of road transport as follows.

“Since the country’s economy is still largely agrarian in character . . .

roads constitute a critical element of the transportation infrastructure. Road

construction and maintenance generate sizeable employment opportunities, a

factor that has assumed considerable importance with demographic

expansion and the growth of labour force. Better roads also achieve economy

in fuel consumption and improve the overall productivity of the road

transport sector. Road development will thus continue to play and important

role . . . .”23

22. Weidnefelt Kurt, Encyclopedia of social sciences Vol.XV P.80

23. Government of India, Seventh Plan, 1985

63

Playing a complementary role to railway transport, road transport

assists the proper functioning and development of railways. It connects the

interior villages and hilly regions of India with towns and cities. It helps for

the security of the nation by facilitating the movement of troops, arms and

ammunitions in times of war. It contributes to the development of agriculture

and industry. Road transport also helps to spread education and culture. It

assists in efficient administration of the country by facilitating the movement

of police, army etc, in order to maintain the law and order.

Classification of Roads:

The chief Engineers of all the provinces met at Nagpur in 1943 and

evolved a road plan based on the minimum requirements of the country. This

plan known as the Nagpur Plan has classified roads into four groups.

Roads

National Highways State highways District Roads Rural/ Villages

Roads

National Highways connect the national capital Delhi with state

capitals and important cities. The present National Highway System includes

a total length of 65569 kms. It constitutes about 3% of total road length and

carries nearly 40 percent of the road traffic. The construction repairs and

administration of these roads is the responsibility of the central Government.

Considering the importance of the National Highways and the rapid increase

in traffic, the government has taken-up the National Highway Development

Project in different phases. The NHDP Phase-I includes the Golden

64

quadrilateral of 5846 kms., connecting the four major cities viz. Delhi,

Mumbai, Chennai and Kolkata. The NHDP phase-II includes North-South

and East-West corridors of 7300kms., connecting Srinagr in the North to

Kanyakumari in the Sorth and Silchar in the East to Porbandar in the West.

The phase III of the NHDP will take steps for four-laning of 4015 kms at an

estimated cost of 22000 crore. Phase IV comprises two laning of 20000

kms of single-lane highways. Under phase V 5800 kms of the Golden

Quadrilateral will be six-laned. In the next phase ring roads, by passes,

service roads and flyovers are proposed to be developed to ease congestion

in the major cities. The NHAI is the nodal implementing agency for national

highway projects in the country. The prime ministers panel on infrastructure

has set high targets for highway development involving a total investment of

22000 crore for nearly 46000 kms of national highways.

Table2.2 Road Network in India

Category Length (in kms)

National Highways 65569

State Highways 131899

District Roads 467763

Village Roads 2650000

Source: Economic Survey 2003-04

State highways and major district roads constitute the secondary

system of road transportation in the country. The state highways provide

linkages with the National Highways, district headquarters, important towns,

tourist centers and minor ports. Their total length is about 124300kms. Major

district roads run within the district connecting areas of production with

markets, rural areas to the district headquarters and to state highways or

national highways. It is assessed that the secondary system carries about

65

40percent of the total road traffic and comprises 12 percent of the total road

length. By acting as the link between the rural and urban areas, the state

highways and major district roads contribute significantly to the rural

economy and industrial growth of the country.

Village roads connect villages with one another and also connect the

nearest district roads, highways, railway stations or ports. The rural network

in India comprises of about 26.50 lakh kms. only 64 percent of the villages

of the country have rural road connections. As early as 1943, the Nagpur

plan suggested the accessibility standards for villages in highly developed

agricultural and non-agricultural areas. This was followed by the proposal of

the Bombay plan which prescribed of these roads received fillip during the

Fifth plan when construction of these roads was made a part of the Minimum

Needs Programme (MNP). The MNP under fifth plan envisaged connection

of villages with all weather roads. Similarly the sixth plan had the target that

all villages with population between 1000 and 1500 should be connected

with all weather roads by 1990.

Besides the Nagpur plan and the Bombay plan another plan that gave

emphasis on the development of rural roads was the Lucknow plan (1981-

2001). Apart from the MNP outlay, funds were also available for

construction of rural roads under Jawahar Rojgar Yojana (JRY). The Ninth

plan set a target of connecting all villages by the end of the plan period. It

was estimated that about 56.55 percent of total villages had been connected

by all weather roads by the end of the Eighth plan. Despite all the efforts

made by the centre and state Governments through different programmes,

about 40 percent of the villages in the country still remained to be connected

by all weather roads.

66

Railway Transport:

The history of economic development of Europe, USA and many

other parts of the world shows that their economic development owes a great

deal to the development and expansion of railways. According to Rostow,

Railways were crucial for the economic development of United States’24

He

states that the introduction of the railroad has had three major kinds of

impact on economic growth during take off period. First, it has lowered

internal transport costs, brought new areas and products into commercial

markets and performed the Smithian function of widening the market.

Secondly it has been a prerequisite in many cases to the development of a

major export sector which in turn has served to generate capital for internal

development. Thirdly, the development of railways has led on the

development of modern coal, iron and engineering industries.

The Indian Railways which made a modest beginning in April 1853

has become the second largest rail network in the world. It has been

contributing to the industrial and economic landscape of the country for the

last several decades the Indian Railways is the principal mode of transport

for carrying bulk goods and long distance passenger traffic Given India’s

continental size geography resource endowment and diversity the Railways

play a key role in not only meeting the transport needs of the country but

also in binding together dispersed areas. It also plays a key role during war

and emergencies when huge quantities of materials and men are required to

be moved across the country at short notice. The Indian Railways entered

into a phase of dynamism and active development during the plan period.

The plans included the projects which created new facilities and

improvements.

24. W.W. Rostow, ‘The Stages of Economic Growth Cambridge University Press, 1964.

67

Because of the increasing emphasis on the railway sector the railway

route length has been increasing in the country. It was 53596kms in 1950-51

which increased to 63465kms in 2004-05. The state wise data reveal that

states like Uttar Pradesh, Maharashtra, Rajastan, Madhya Pradesh, Gujarat

and Andrapradesh have benefited a lot from the railway development in the

country which is seen from the figures of railway route length in those states.

States which are lagging behind in this respect are Chattisgarh, Haryana,

Uttranchal and Orissa.

Table 2.3 State wise Railway Route Length (in kms)

States 2000-01 2001-02 2002-03 2003-04 2004-05

Andhra Pradesh 5135 5197 5197 5196 5205

Assam 2516 2516 2516 2517 2506

Bihar 3442 3429 3224 3377 3379

Chattisgarh 1180 1180 1180 1159 1159

Delhi 200 200 200 178 205

Gujarat 5312 5310 5285 5283 5284

Haryana 1548 1548 1554 1623 1597

Jharkhand 1797 1797 1798 1943 1941

Karnataka 2974 2974 2974 2960 2982

Madhya Pradesh 4785 4845 4825 4849 4905

Orissa 2309 2320 2324 2284 2280

Punjab 2102 2102 2102 2098 2098

Rajastan 5926 5894 5900 5835 5838

Tamilnadu 4188 4189 4184 4201 4171

Uttar Pradesh 8572 8578 8799 8566 8545

Uttaranchal 356 356 345 345 345

West Bengal 3662 3681 3680 3706 3856

Maharashtra 5459 5459 5450 5497 5527

India 63028 63140 63122 63221 63465 Source: Centre for monitoring Indian Economy, Infrastructure 9Mumbai: CMIE, May-2006.

68

Air Transport

Civil aviation is the most modern mode of transport. The phenomenal

growth of the global aviation industry can be gauged from the fact that

where as in 1945 only nine million passengers traveled on scheduled

services in the whole world, in 2003 about 1.66 billion passengers were

carried over 180-fold increase. India has not remained insulated from the

global trend. Air traffic is growing but at a slightly lower rate than the global

rate.

In 2004, there were five domestic passenger lines flying in the Indian

sky which increased to nine in 2006. The growth in Indian air traffic both

domestic and international is the second fastest in the world. The airports

have grown on all the three major parameters, passenger number, aircraft

movements and cargo carriage. Domestic air traffic has outpaced

international. For instance, in 2003, the total domestic passenger traffic was

32076000 as against 16625000 international passengers. It is also estimated

that the total air passenger traffic of India would escalate up to 124650000 in

2025. The aircraft movement in India is also rapidly increasing.

The Airport Authority of India manages 126 airports which include

fifteen international airports. Growth of Indian airports is second only to

China. The civil aviation sector has played an important role in the Indian

economy. It provides fast and reliable mode of transport across the country

and is particularly important for many areas and places. Which are not yet

adequately connected by rail or road. With increasing globalization this

sector will play a more significant role in integrating the Indian economy

with the rest of the world. The demand for air traffic has picked up suddenly

since 2004-05. Air traffic could grow over 2.5 times during 2010 to 2011.

However, the airport infrastructure is not modernized in tandem with the

growth. The airports are not suitably developed and the standard of service

provided by them is generally poor. Major airports are congested during

69

night in respect of international operations. Domestic operations create

congestions during morning and evening hours at major airports. Paucity of

parking bays in airports and runway capabilities in terms of number of

flights it handles in an hour are the biggest concerns for airlines.

Table: 2.4 Air Traffic in India-past Trends and Forecasts for 2025

Year Aircraft movement (000 Passenger (000)

International Domestic Total International Domestic Total

1995 92 315 407 11450 25564 27014

1996 95 324 419 12224 24276 36500

1997 98 318 416 12783 23849 36632

1998 100 325 425 12917 24073 36990

1999 100 368 468 13293 25742 39035

2000 103 387 490 14009 28018 42027

2001 108 402 510 13625 26358 39983

2002 106 404 510 14827 29161 43988

2003 133 506 639 16625 32076 48701

2025

(forecast)

315 1079 1397 48632 76018 124650

Source: FICCI, Strengthening Policy Reforms for Transport Infrastructure Development Policy

Retreat and Dissemination Workshop, New Delhi, 23-03-2005.

Water Transport

The importance of maritime trade in world economy is huge. With

newer technology and bigger sips the share of cargo movement by sea is on

the rise. The sea trade in India dates back centuries and in more recent times

it has been growing in importance, with 12 major ports and 187minor and

intermediate ports dotting its coast. The role of shipping in promoting trade

and development has been well recognized. The shipping sector assumes

special significance in India as over 90 percent of the country’s overseas

trade in terms of volume and 68 percent in terms of value are sea-borne.

Water transport, especially the shipping transport is indispensable for the

70

growth of foreign trade of a country. Though the slowest in terms of speed

this is the cheapest mode of transport. Dependence on shipping transport is

almost cent percent in the carriage of bulky goods and heavy machinery to

far off countries. Its importance in the accumulation of valuable foreign

exchange reserves for a country cannot be underestimated. Our country,

having an extensive coastal line of 6720kms has immense potentialities for

the development of the shipping industry on sound lines.

Liberalization and simplification of ship acquisition was initiated in

the Eighth Plan and it continued in the Ninth Plan also. The earlier

requirement of approval by the ship acquisition Licensing committee of the

Ministry of shipping has been dispensed with. All vessels have been put

under open general license from 2001 to make their imports easier. The need

for improving ports and maritime facilities has increased with the foreign

trade policy for 2004-09 aiming at doubling India’s share of global

mercantile trade. Inspite of these there is an urgent need to develop a port-

centered approach by way of providing land and other facilities for industry

to come and stay near ports. There is also a need to adopt an integrated

approach by linking ports with roads railway network and even airports.

Thus transport has given to the people at large mobility hitherto

undreamed of contributing strongly to the development of greater nation-

wide homogeneity in thought and experience and breaking down most of the

last remnants of local interests. Transport has succeeded in building up a

social structure where people can better understand their indigenous culture

and tradition. The more they know about their country, the more proud will

they be about it and thus develop better social relations even in the midst of

diverse religions, cases languages customs food habits etc. There fore,

transport has been considered a basic prerequisite of the modern economy.

Without it, the life of the country gets itself paralysed. It acts as a catalytic

agent for a comprehensive development of the country.

71

Telecommunication

Telecommunication is one of the prime support services needed for

rapid growth and modernization of various sectors of the economy. It has

become more important in recent years because of the rapid growth of

information technology and its significant impact on the economy. Keeping

in view all its advantages the Tenth Plan focused on the provision of world

class telecommunication facilities at reasonable rates. Provision of telecom

services in rural areas would help to attain the goal of accelerated economic

development and social change. Because of its importance the telecom sector

in India has been witnessing a continuous process of reform since 1991.

Because of the various steps taken during the last one and half decade,

telecommunication has become one of the fastest growing sectors in India.

The basic telecom services network has expanded from about 84,000

connections at the time of independence to about 385.95 lakh on March

31,2002. The total number of telephones including basic and mobile rose

from 22.8 million in 1990 to more than 125 millions at the end of December

2005. Although India has a 125 million strong telephone network, the

telephone penetration rate continuous to be low. However, viewed in the

context of global patterns and indicators, the sector is still in the early stages

of development. Our teledensity was only 4.01 as compared to the global

average of 32.78(in 2001). The comparative position of teledensity in a cross

section is presented in the following table. It is seen that India is till way

behind China and other global players such as the US, Brazil, Japan,

Germany and Russia.

72

Table: 2.5 Teledensity-International Comparisons 31 12-2001) Country Main Telephone Lines(in lakh) Teledensity

1995 2001 CAGR(%) 1995 2001 CAGR(%)

USA 1597.35 1900.00 2.9 60.73 66.45 1.5

UK 294.11 353.26 3.1 50.18 58.8 2.7

Australia 89.00 100.60 2.1 49.25 52.02 0.9

Brazil 132.63 374.30 18.9 8.51 21.78 17.0

Mexico 88.01 137.73 7.7 9.39 13.72 6.5

South Africa 40.02 49.69 3.7 10.14 11.35 1.9

Egypt 27.16 66.50 16.1 4.67 10.30 14.1

Japan 622.92 760.00 3.4 49.61 59.69 3.1

Malaysia 33.32 47.38 6.0 16.57 19.91 3.1

China 407.05 179.34 28.0 3.30 13.81 26.9

Pakistan 21.27 34.00 8.1 1.87 2.35 5.8

India 119.78 347.32 19.4 1.29 3.38 17.4

Assia 1816.88 3911.79 13.6 5.46 10.85 12.1

World 6892.51 10460.9 7.2 12.29 17.21 5.8 Source: Government of India, Tenth Five plan vol.11 p.1051

But the current growth rates will almost certainly spell a new order in

the future. It is estimated that India will have 270 Million Phone lines by

December 2007 and that should put us second globally only to china.

However, with over a billion people, these figures translate to a teledensity

of only slightly over 9 percent.

Though this is quite low, it is increasing at a rapid rate. The

teledensity increased by 1.91 percent in 2004.2005. On the country, India

teledensity increased by 1.92 percent in the 50 years from 1948-1998. The

growth is also being buoyed by the fact that India has lowest rates of mobile

telephony in the world today, which is shown in the following table. India

also has among the largest number of cellular operators and the competition

is helping boost growth rates.

73

Table:2.6 Cellular subscribes in selected countries in Country 1995 2001

India 76 6431

China 3629 144,820

U.S.A 33,785 128,374

Japan 1171 74819

Germany 3725 56245

Italy 3923 51246

U.K 5736 46282

France 1303 35922

Korea 1641 29045

Brazil 1285 28745

Spain 945 29658

Maxico 688 21757

Taiwan 722 21633

Turkey 437 19573

Netherlands 539 12352

Australia 2242 11132

Philippines 493 12159

Canada 2589 10861

Malaysia 1005 7128

Hong Kong 798 5776

Indonesia 210 6520

Singapore 306 2991

Saudi Arebia 16 2528

Bangladesh 2 520

World 90692 956412 Source: Tata services limited, statistical outline of India. 2003-04 (Bombay Tata Services limited,

Jan 2004).

Access to telecommunication in different states of the country shows

that there are 29 telephones per 1000 in Karnataka which is shown in the

following table.

Table: 2.7 Access to Telecommunication in Selected States.

States Telephones per

1000 people

Internet connections per

1000 people

Maharashtra 43 8.21

Punjab 47 1.24

Kerala 43 0.87

Karnataka 29 2.73

West Bengal 16 2.51

Orissa 09 0.12

Uttara Pradesh 10 0.12 Source: Quality of life: India improves by 13 notches Times of India, 12 July 2001.

74

Rural Teledensity

Every village is a knowledge center. Rural infrastructure has to be

enhanced for the information revolution to reach villages. While horizontal

connectivity was needed between villages to harness and share local

resources, vertical connection was needed at the administration level. If

connectivity is taken to downwards, it will strengthen rural employment and

the Sarva Shiksha Abhiyan Movement. Despite its potential benefits, the

impact of telecom revolution on rural India has been insignificant. India’s

rural populace hardly has any mobile coverage, despite accounting for 70

percent of the country’s population. Rural teledensity, measured as the

availability of phones per 100 persons, is very low at 1.9 percent compared

to urban teledensity of 31.1 percent as showen in the following table.

Table:2.8 Teledensity: Urban-Rural Divide

Year Urban Rural

1998 5.78 0.43

1999 6.87 0.52

2000 8.23 0.68

2001 10.37 0.93

2002 12.2 1.21

2003 14.32 1.49

2004 20.79 1.55

2005 26.2 1.74

2006 31.1 1.94 Source: “Rural India Cell-dom connects with Urban” The Economic Times 14 October 2005

Rural teledensity, at present, is about one- third of the urban

teledensity. The rural-Urban divide has not shown any sign of reducing.

Mobile network covered 1700 out of 5200 towns with a total population of

200million in 2003-04. In contrast, hardly any rural areas had mobile

coverage. In Karnataka, for example, rural teledensity is only 2.79 percent

while urban teledensity is 44.27 percent. Uttar Pradesh, Bihar, Chhattisgarh

and Assam have teledensity below 1 percent. Kerala has the highest rural

75

teledensity of 10.66 percent. Punjab has the highest overall teledensity of

28.15 percent. However, only 5.20 percent of its total rural population has

telephones, while 65.05 of its urban population had telephones as on April

30, 2006. Jharkhand has the lowest teledensity of 2.10 percent. Only 0.5

percent of its total rural population has telephones, while 7.86 per cent of its

urban population had telephones. It appears that the whole development in

the telecom sector is taking place only in the urban areas.

Internet Use:

Internet use in India has grown more than 11 times over the last seven

years which is shown in the following table.

Table: 2.9 Internet use in India (in lakhs)

User in 2000 2007 Growth(%)

Top 8 metros 10.78 58.52 543

Smaller metros 1.82 32.34 1777

Non-metro towns 0.56 18.48 3300

Small towns 0.7 44.66 6380

Total users 14 154 1100 Note: Metros population of 40 lakh or above, small metro 10 lakh to 40 lakh, non metros -5 lakh

to 10 lakh, small towns-below 5 lakh.

Source: “Small-towns Drive Internet Boom’ Times of India” October 2007.

The boom is driven not by metros, but by smaller and non-metro

towns, where the number of users has risen by a whopping 69 times and 33

times respectively since 2000. The number of users has grown in all socio-

economic categories, as well as in all metros and non-metros towns. In

absolute terms, the top eight metros still have the largest numbers. However,

the growth has been the fastest in the smaller and non-metro towns. In fact,

small towns have the second largest numbers of total users after the top eight

metros put together, where the total number has grown by just over five

times. Using the internet in schools and colleges is the fastest growth

category -22 times that it was in 2000- indicating increasing computerization

of educational institution. However, in absolute numbers, cybercafés have

76

the largest numbers accessing the internet, about 57 lakh, followed by those

logging on from home. In terms of activities on the net, E-mail and

information search are still the biggest drivers of internet use. More than

78.5 lakh people use the net for E-mail compared with less then half that

number, nearly 37 lakh for information search. With the highest jump of 27

times in the number of user since 2000, the entertainment segment comprises

games, ring tones, music, video downloads has caught up with the chat

segment. Both have about 15.4 lakh users followed by e-commerce-

including online travel, share trading, banding and buying products, which

has grown nearly 25 times since 2000. On account of this reason that Indian

will emarge as an economic power house by 2020.

2.7 ENERGY INFRASTRUCTURE:

Energy has been called the fuel of economic progress. Inadequate

supply of energy can inhibit development. Taking the data of 153 countries,

‘Fremont Felix’25

has shown that there is a close relationship between per

capita income and per capita energy consumption. Darmstadtes26

and others

have also recognized this fact. A.O. Hirschman27

using the categories of

social overhead capital (SOC) and directly productive activities (DPA) has

highlighted the importance of energy in sustained economic growth. Energy

inputs such as electric power and coal are required to support a growing

industrial sector. The steady availability of cheap energy may serve to

stimulate industrial development. According to Robinson a 3 percent hike in

industrial production in the world is accompanied by a 2 percent increase in

energy consumption. Consequently energy supply policy could be crucial to

25. Felix Freemont-“Growth of Energy Consumption and National Income throughout

the world” IEEE spectrum, July 1964, PP 81 to 102

26. Darmstadter et. Al “Energy in the world Economy” (Baltimore, John Hopkins Press,

1971)

27. Alberto O. Hirschman, “The strategy of Economic Development” New Haven, Yale

University Press, 1958

77

future resource development and economic growth in India. Power shortages

in the past in India have affected a wide range of economic activity in both

the industrial and agricultural sector. Coal shortages have caused curtailment

in steel production and power generation. Fertilizer production has been

adversary affected by inadequate energy supplies. The drastic price increase

and supply constraints on petroleum products caused disruptions in transport

and industrial activity. Uncertainty regarding future availability and cost to

energy would act as a determinant to both private and public sector

investment in the current period, similarly expectations of abundant energy

supplies at reasonable cost could provide a stimulus to investment.

In India the total energy requirement is obtained from commercial and

non commercial sources. About 40 percent of the energy consumed is

obtained from non-commercial sources such as firewood, dung-cakes and

agricultural wastes28

. Mostly, the population living in the rural areas of the

country depends upon the non commercial sources, which are renewable in

nature. The other types of energy are called commercial energy which

accounts for 60percent of the total energy supplies. Its supply was only 26

percent in 1950-51. The primary sources of commercial energy available in

India are coal, oil, natural gas, hydropower nuclear power etc. The overall

indigenous production of commercial energy in India increased from 53

million tones of oil equivalent in 1972-73 to 195 million tones of oil

equivalent in 1995-96 at an average growth late of 6 percent coal accounted

for as much as 64percent of total energy availability in 1972-73 and its share

declined to 58-60percent in 1996-97, where as the share of Oil and natural

gas increased over the years. It was 17 percent in 1972-73 and increased to

28 percent in 1995-96.

28. Nand Dhameja, “Power Sector Reform: Warrant Good Government”, in S.P.Verma (ed)

‘Infrastructure in India’s Development’ Kanishka publication,New Delhi. 2004

78

Commercial Sources of Energy:

Hydroelectricity: The development and distribution of hydro power

depends upon supply of water in river, lakes reservoirs etc. These hydel

power resources are available in Punjab, Himachal Pradesh, Jammu and

Kashmir, Kerala, Karnataka and the States of the North-East. Nevertheless,

hydro power in India is the most neglected power sector out of the total

installed capacity of about 1,27,673 M.W. contribution of hydro power is

about 33,600 M.W. which is about 26 percent of the total installed capacity.

There is abundant scope for rapid addition of hydro power and increasing its

share in the total installed capacity of the country. India has huge hydro

potential to the tune of 1,48,700 mw of installed capacity. Out of this, only

33,600mw has been developed so far. This clearly indicates that out country

has over 74 percent of hydro potential that is available for development.

Lack of investment in the segment has been identified as the main cause of

worsening hydro-thermal mix. The other major constraints that dampened

hydro development in the country in the past are technical issues like non-

availability to bankable DPRs, inadequacy in tunneling methods, shortage of

competent contacting agencies especially for civil works, geological

surprises, financial issues like highly capital intensive sector, deficiency in

providing long term financing, tariff issues, infrastructure and administrative

issues like delays in land acquisition rehabilitation and resettlement issues

law and order etc.

However, hydropower development in the country has now been well

recognized as national priority and attention of the government for its future

development. Many key initiatives have been taken by the Government of

India like introduction of Hydro policy, ranking study of potential

hydroelectric sites etc. This has definitely given a major boost to the hydro

sector which is now gearing up to meet the future challenges in meeting the

huge power demand of the country. Presently the National Hydroelectric

79

Power Corporation (NHPC) is operating10 hydro power stations with total

installed capacity of 3755 mw. Another 13 projects totaling 5712mw are

under active construction stage. The NHPC has set an ambitious target of

adding 1970mw during the Tenth plan against which projects with aggregate

capacity of 1580mw have already been commissioned. Another 14 projects

with installed capacity of 5837mw are targeted to be completed during the

Eleventh Plan (2007-12) and 13 projects totaling 12,610mw during 12th plan

(2012-17).

Table:2.10 Trends in commercial Energy Production Fuel Units Production

1960-61 1970-71 1980-81 1990-91 2001-02 2006-07

Coal(Mt) 55.67 72.95 114.01 211.73 325.65 405.00

Crude Oil (Mt) 0.45 6.82 10.51 33.02 32.03 33.97

Natural Gs

(BCM)

- 1.44 2.35 1.79 29.69 37.62

Hydro Power

BKwh

7.84 25.25 46.54 71.66 82.80 103.49

Nuclear Power

(BKHW)

- 2.42 3.00 6.14 16.92 19.30

Wind Power

(Bkhw)

- - - 0.03 1.70 4.04

Source: Gopalji and Suman Bhakri, ‘Statistical Data on Indian Economy (New Delhi, Allied

Services 2005)

It is estimated that about 41,000 crore will be required till the year

2012 to meet the capacity addition within the Eleventh Five Year plan. For

this capacity addition the Government of India is expected to provide

budgetary support of about 11,200 crore. The NHPC plans to raise about

4800 crore through internal resources during the coming few years. For the

balance, the NHPC is likely to approach the domestic and international

market for long term loans.

80

Power Consumption:

The Indian power sector characterized by inadequate capacity remains

poor in supply. The per capita electricity consumption in India is one of the

lowest in the world. It was 283 units in 1993 and reached 338 units in 1996-

97 and 592 in 2004, Globally India ranks 119th

in per capita power

consumption. The country’s average per capita consumption is less than 5

percent of U.S. which tops the international list at 13,228kwh. The US is

followed by Australia (10,502kwh), France (7,366kwh) and Germany

(6,742kwh). Pakistan’s power consumption is 384kwh, much lower than

India’s. However, in terms of total consumption, India is 7th in the world

with total consumption of 497 billion kwh per annum, while us comes first

with 3,602 billion kwh, which is shown in the table 2.11 below.

Table: 2.11 Power Consumption and Ranking of Selected countries.

Country Per Capita

(kwh)

Ranking Total (Bn

Wkh)

Ranking

USA 33,228 9 3,602 1

China 1,208 93 1,312 2

Japan 7,606 15 964 3

Germany 6,742 24 506 5

India 592 119 497 7

Pakistan 384 124 62 33 Source: “State Ranks 25th in per capital power usage”. The Economic Times 9th August 2005.

The per capita power consumption in various states and union

territories shows that Dadra and Nagar Haveli tops the list with per capita

consumption of 7,497kwh followed by Daman & Diu at 7,038kwh. Goa is

third in the list at 2,178kwh followed by Pondichery (1894kwh), Delhi

(1,542kwh) and Chandigarh(1499kwh). The figures are 410kwh in West

Bengal, Madhya Pradesh 474kwh, Bihar 75kwh, Nagaland 156kwh. The

north-eastern states have not fared well in the power race. Their per capita

power consumption range from 156kwh for Nagaland to 360kwh for

81

Mizoram, Assam’s consumption was just 160kwh, Sikkim’s consumption is

765kwh. In the southern region Kerala has the lowest per capita

consumption, lower than the all India average. One of the reasons for this is

the high density of population which results in restricted energy supply.

Rural electrification:

Rural electrification can play a vital role in the economic development

of a country. In the developing countries like India, access to electricity

services can be a key driver of economic development and poverty

alleviation. In rural areas where electricity supply is reliable, there is an

increase in on and off-form growth rate. Electricity powered pump sets and

also processing machinery enable the formers to irrigate and improve fields.

The non-form sector also benefits from increased productive activities and

the highest efficiency of mechanical processes. Data from a household

survey in India shows that both education and electricity can lead to a higher

non-farm income, delivering these services increase the household income

by 2-3 times.29

There has been considerable progress in the rural electrification

programme since independence. From a mere 1500 villages that had access

to electricity in 1947, close to 4,99,000 villages have been electrified in 2005

which is shown in the following table no.-- Thus about 85 percent of the

villages in the country are covered. Moreover, eight states such as Andhra

Pradesh, Goa, Haryana, kerala Punjab, Tamilnadu, and Nagaland have

achieved 100percent electrification. States such as Himachal Pradesh,

Jammu and Kashmir, Karnataka, Madya Pradesh, Mizoram, Rajasthan and

Tripura have achieved more then 95 percent electrification

29. Douglas F. Barnes Kevin B Fitzgerald and Hendry M. Peskin-“The Benefits of Rural

Electrification in India: Implications for Education, Household lighting and Irrigation”

World Bank Washington D.C. 2004

82

Table: 2.12 Number of Villages Electrified

Year No. of villages Electrified

1947 1500

1970 74000

1990 471000

2005 499000

2012* 587000

*Projected figure

Table: 2.13 India’s Village Electrification by State

State Inhabited villages

(1991 census)

villages

Electrified

Andhra Pradesh 26,586 100

Arunachal Pradesh 3,649 64

Assam 24,685 77

Bihar 67,513 71

Goa 360 100

Gujarat 18,028 100

Haryana 6,759 100

Himachal Pradesh 16,997 99

Jammu & Kashmir 6,477 97

Karnataka 27,066 99

Kerala 1,384 100

Madya Pradesh 51,806 97

Maharashtra 40,412 100

Manipur 2,182 92

Meghalaya 5,484 47

Mizoram 698 99

Nagaland 1,216 100

Orissa 46,989 75

Punjab 12,428 100

Rajasthan 37,889 96

Sikkim 447 100

Tamilnadu 15,822 100

Tripura 855 95

Uttar Pradesh 97,122 80

West Bengal 37,910 78

Chattisgarah 19,720 92

Uttaranchal 15,681 81

Union territories 1,093 100

All India 4,90,233 88

Source: World Bank, ‘Rural Access to Electricity (Washington D.C) World Bank 2004.

83

Power Sector Scenario in India:

Power is one of the prime movers of economic development. The level

of availability and accessibility of quality power is one of the important

determinates of quality life. Therefore, the Government has been giving

increasing emphasis on this sector since the dawn of the planning era. The

installed generating capacity has increased term 1362mw at the time of

independence in 1947 to about 127673mw in 2006. On the whole, the

increase in installed capacity of power during the period from 1950 to 2000

has been a 60 fold increase with an annual growth rate of 8.5 percent.

Similarly, there was 95 times increase in energy generation from 5.1 billion

kwh in 1950-51 to 480.1 billion kwh in 1999-2000 with an annual rate of 10

percent. Despite the increase, the power sector has not kept pace with the

growth.

Table: 2.13 Statewise Growth of Installed Capacity States Installed Capacity(MW) Annual Average Compound

Growth rate (%)

1970-71 1980-81 1997-98 1970-81 1980-98 1970-98

Andra Pradesh 608 2240 5764.2 13.92 5.72 8.68

Assam 180 228 616.7 2.39 6.02 4.66

Bihar 499 941 1988.4 6.55 4.45 5.25

Delhi 252 276 653.6 0.91 5.20 5.39

Gujarat 907 2197 4883.2 9.25 4.81. 6.43

Haryana 504 1141 1780.3 8.51 2.65 4.78

Himachal Pradesh 51 129 299.5 9.72 5.08 6.77

Jammu & Kashmir 40 206 365.8 17.81 3.43 8.54

Karnataka 878 1470 3434.5 5.28 5.11 5.18

Kerala 547 1012 1775.8 6.35 3.36 4.46

Madhya Pradesh 727 1631 3875.9 8.41 5.22 6.39

Maharashtra 2119 3992 8289.8 6.53 4.39 5.18

Meghalaya 68 131 188.8 14.01 2.17 4.75

Orissa 564 923 1693.0 5.04 3.63 4.15

Punjab 680 1536 2465.1 8.49 2.82 4.88

Rajasthan 541 810 1369.8 4.11 3.13 3.50

Tamil Nadu 1966 2329 5763.0 1.70 5.47 4.06

Uttar Pradesh 1351 3612 6168.8 10.33 3.19 5.78

West Bengal 1212 1726 2904 3.59 3.10 5.78

All India 14709 30214 89090.5 7.46 6.56 6.99

84

2.9 BANKING:

Banking in India has its origin as early as the Vedic period. It is

believed that the transition from money lending to banking must have

occurred even before Manu, the great Hindu Jurist, who has devoted a

section of his work to deposits advances and laid down rules relating to rates

of interest. During the Mogul period, the indigenous bankers played a very

important role in lending money and financing foreign trade and commerce.

During the days of East India Company it the turn of the agency houses to

carry on banking business. The Central Bank of India was the first joint

stock bank to be established in the year 1786. The others which followed

were the bank of Hindustan and the Bengal Bank. The Bank of Hindustan is

reported to have continued till 1906 while the other two failed in the

meantime. In the first half of the 19th century the East India Company

established three banks, the Bank of Bengal in 1809, the Bank of Bombay in

1840 and the Bank of Madras in 1843. These three banks also known as

presidency Banks, were independent units and functioned well. These three

banks were amalgamated in 1920 and new bank, the imperial Bank of India

was established on 27th

January 1921. With the passing of the State Bank of

India Act in 1955 the undertaking of the Imperial Bank of India was taken

over by the newly constituted state Bank of India. The Reserve Bank which

is the Central Bank was established in 1935 by passing Reserve Bank of

India Act 1934. In wake of the Swadeshi Movement, a number of banks with

Indian management were established in the country viz, Punjab National

Bank Ltd., Canara Bank Ltd., Indian Bank Ltd, the Bank of Baroda Ltd, The

Central Bank of India Ltd. On July 19 1964, 14 Major Banks of the country

were nationalized and on 15th

April 1980 six more commercial private sector

banks were also taken over by the Government. Today the commercial

banking system in India may be classified into public sector banks which

includes

85

a. State Bank of India and its associate banks called the State Bank

Group.

b. 20 nationalized banks

c. Regional Rural Banks mainly sponsored by Public Sector Banks.

Private sector Banks which includes:

a. Old generation private banks

b. New generation private banks

c. Foreign banks in India

d. Scheduled Co-operative banks

e. Non scheduled banks

Co-operative Banking Sector:

The co-operative banking sector has been developed in the country to

supplements the village money lenders. The co-operative banking sector is

divided in to the following components.

i) State co-operative Banks

ii) Central Co-operative Banks

iii) Primary Agriculture Credit Society

iv) Land Development Banks

v) Urban Co-operative Banks

vi) Primary Agricultural Development Bank

vii) Primary Land Development Banks

viii) State land Development Banks

Development Banks, which includes:

(i) Industrial Finance Corporation of India (IFCI)

(ii) Industrial Development Bank of India (IDBI)

(iii) Industrial Credit and Investment Corporation of India (ICICI)

86

(iv) Industrial Investment Bank of India (IIBI)

(v) Small Industries Development Bank of India (SIDBI)

(vi) National Bank for Agriculture and Rural Development (NABARD)

(vii) National Housing Bank

Currently, overall banking in India is considered as fairly mature in

terms of supply, product range and reach-even though reach in rural India

still remains a challenge for the private sector and foreign banks. Even in

terms of quality of assets and capital adequacy, Indian banks are considered

to have clean, strong and transparent balance sheets as compared to other

banks in comparable economies in its region. The Reserve Bank of India is

an autonomous body, with minimal pressure from the Government. The

stated policy of the bank on the Indian Rupee is to manage volatility without

any stated exchange rate and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite

some time especially in its service sector the demand for banking services

especially retail banking, mortgages and investment services are expected to

be strong.

Currently, India has 88 scheduled commercial banks, 28 public sector

banks (that is with the Government of India holding Stake), 29 private banks

and 31 foreign banks. They have a combined network of over 53,000

branches and 17,000 ATMs. According to a report by 1CRA Limited, a

rating agency, the public sector banks hold over 75 percent of total assets of

the banking industry with the private and foreign banks holding 18.2 percent

and 6.5 percent respectively.

87

2.10 CO-OPERATIVE SECTOR:

A co-operative form of business organisation is a voluntary

association of persons for mutual benefit and its aims are accomplished

through self-help and collective efforts. It is a voluntary association of the

people organized on the basis of equality for some common purpose. The

basic principle of co-operation is “Each for All and All for Each”. A

minimum of ten persons are required to form a co-operative society. To be

called a co-operative society, it must be registered with the Registrar of co-

operative societies under the co-operatives societies Act.

Originally, the word “co-operation” is derived from the Latin term

‘co-operari’ which means ‘to work with’. Thus, etymologically speaking, a

co-operative is an enterprise which is collectively owned and operated for

the mutual benefit.

Apart from this, some of the definitions given by the experts also

throw light on the meaning of co-operation or co-operative societies.

“A co-operative is a form of organization where in persons voluntarily

associate together as human beings on the basis of equality for the promotion

of the economic interests of themselves”.

-H.Calvert.

“Co-operative organization is an association of persons, usually of

limited means, who have voluntarily joined together to achieve a common

economic end through the formation of a democratically controlled business

organization, making equitable contributions to capital required and

accepting a fair share of risks and benefits of the undertaking”.

-International Labour Organisation.

“A co-operative Society is a society which has as its objectives the

promotion of economic interests of its members in accordance with co-

operative principles”.

-The Indian Co-operative Societies Act, 1912.

88

Principles of Co-operation:

The International Co-operative Alliance, appointed an Authoritative

Commission, after World War-II. This Commission formulated rather,

formalized the principles of co-operation. They are-

1. Voluntary and open membership.

2. Democratic Management.

3. Limited Interest on capital.

4. Patronage dividend in proportion of members’ transactions.

5. Education and Training.

6. Co-operation among co-operatives.

There have been also other principles like the principles of political

neutrality, correct weight and measures, purity of goods and thrift which

were also taken into consideration.

89

Fig. 2.3 Classification of Co-operative Societies

CO-OPERATIVE SOCIETIES

Co-operative

Credit Societies

Co-operative Non-

credit societies

Agricultural

Credit Societies

Nonagricultural

Credit Societies

Agricultural Non

Credit Societies

Non Agricultural

Non Credit Societies

Long-Term

Credit

Societies

Short-Term

Credit

Societies

1. Primary Land

Development

Banks

2. Central Land

Development

Banks.

1. Primary

Agricultural

Credit

Societies.

2. Central Co-

operative

Banks

3. State Co-

operative

Banks

1. Co-operative Marketing

Societies

2. Co-operative Farming

Societies.

3. Multi purpose Societies.

Urban

Banks

Salary

Earners

Societies

Others

Producers’ Co-operative Societies

Consumers Co-operative Societies

Housing Co-operative Societies.

Workers Co-operative Societies

Milk Producers’ Co-operative Societies

Fisheries Co-operative Societies

90

Fig.2.4 Structure of co-operative credit Institutions

Note: Figures in parenthesis are as on 31-3-2004

Source: Report on Trend and Programme of Banking in India, 2004-05, RBI, Mumbai30.

Adequate and timely financial support is vital to sustain production

and productivity in any sector of economy. Co-operatives are the

organization of the economically weak and poor people who have come

together for improving their economic conditions with the help of thrift, self-

help and mutual help. In the initial stages co-operatives were considered to

be most ideally suited institutions for disbursing agricultural credit and the

main objective was to save the agriculturists from the clutches of the money

lenders. In due course of time co-operatives spread its activities through out

the length and breadth of the country.

Short term structure (1,06,131) Long-term structure(788)

Central

co-

operative

Banks(365

)

Primary

Agricultural

credit

societies

(1,05,735)

State co-operative

Agriculture

Rural

Development

Banks(20)

Primary co-

operative

Agriculture

and Rural

Development

Banks(768)

Rural co-operative

credit Institutions

(1,06,919)

Urban co-operative

Banks(1,872)

Co-operative Credit Institutions

State co-

operative

Banks 31)

30. Jyotsna Sethi and Nishwan Bhatia – ‘Elements of Banking and Insurance’

91

Defining the role of co-operative in the economy, the Third Five Year

plan observed –“In a planned economy, pledged to the values of socialism

and democracy, co-operation should become progressively the principal

basis of economic life, notably in agriculture”.

The former Prime Minister of India Smt. Indira Gandhi while

describing the importance of co-operative movement exclaimed. “I know of

no other instrument as potentially powerful and full of social purpose as

the co-operative movement”.

In February 1988, while presenting his budget, the Finance Minister of

India declared, “co-operatives are the best instrument for reaching our

farmers; they are also a symbol of self reliance at the village level. I believe

that we must now devote special attention to revitalizing the entire

structure”.31

These policy statements and their follow up in practice foster

the growth of co-operatives in India.

In all developing economies, co-operative sector has been assigned the

role of a major agency rural reconstruction and programmes for its

expansion have been prepared and implemented. A rapidly growing co-

operative sector, with special emphasis on the needs of the peasants, the

workers and the consumers can become a vital factor for social opportunities

and the economic development. It does provide to the social structure and

the national economy, balance, directions and a sense of values. Thus, co-

operative sector can help for bringing about the changes of a fundamental

nature within the economy.

In a large country like India with diversified economic structure,

development of agricultural and allied activities in the rural sector has been

accorded an important place, co-operatives play a vital role in the strategy of

balanced regional development. The Father of the Nation Mahatma Gandhiji

31.C.Shrinivas Shastry, “Co-operatives and National Development – Indian Experience” cit-

Co-operation, published by National Co-operative Union of India-1989, PP-271-75

92

described the co-operatives as “ideally suited organizations for promoting

group efforts”. He further added “co-operation is the Gateway to Economic

Freedom”. Pandit Jawaharlal Nehru, the main architect of modern India

declared, “In the economic structure of India co-operation is not even a free

choice, it is a necessity”. The great leaders, who shaped the destiny of free

India, recognized and showed immense faith in the potential of the co-

operatives for the transformation of Rural India.

2.11 EDUCATION:

Education plays a key role in economic thought. The classical

economists accepted education as a means to increase production. Adam

Smith deemed acquisition of skills through education and study.32

David

Ricardo and Thomas Malthus considered education as means to develop

habit that would be helpful to check population growth. Alfred Marshall in

his Principles of Economics refers education as a national investment.

Marshall viewed that the most valuable of all capital is that invested in

human beings. He advocated that “general education is required to make

people more intelligent and trustworthy”. Education is also an important

means for the production of material wealth. There was growing interest in

the economic values of education during the 1960s which has been rightly

termed by Bowman as the “human investment revolution in economic

thought.”33

During the early 1960s economists like Schultz34

, Denison35

and

32. John Vaizey, “What some Economists said about Education”, in UNESCO, Readings in

the Economics of Education (Parisi UNEXO 1968).

33.M.J. Brown-“The Human Investment Revolution in Economic Thought”, Sociology of

Education, spring 1966 PP 111-137

34. T.W. Schultz, “Education and Economic Growth”, in N.B. Hendry (ed), Social Forces

Influencing American Education’, National Society for the study in Education, University of

Chicago Press 1961.

35. E.F. Dension-“The sources of Economic Growth in the United states and the Alternative

Before US, NewYork committee for economic Development 1962.

93

Kruger36

tried to measure the contribution of education to economic growth,

Gary S. Becker37

examined the concept of investment in human capital.

According to Galbraith the role of education is paramount in the social and

economic development of a country38

. Education not only improves the

productivity of labour but also permits greater specialization, said Eckus39

.

Education & Economic Development:

Education is generally regarded as a public good as well as a merit

good which produce a variety of externalities.40

Contribution of education to

economic growth, distribution, reduction in fertility rates etc. are the

different ways in which education generates public good. Education not only

increases the income levels of those who receive it, but also of others.

Education benefits each individual in the society, improves educational

flexibility and social mobility, promotes voluntary responsibility for welfare

activities, creates healthy environment for national development and helps to

redistribute income and well being. Some of the non-economic benefits of

education are better citizenry, reduction in crime, improved health conditions

and political democracy which are also important for accelerating the

economic development of a country.

36. A.O. Kruger –“Factor Endowment and per capita Income Differences Among Countries”,

Ecomonic Jounal Sept, 1968, Vol.78, PP 641-659

37. Gary S. Becker, “Human Capital: A Theoretical and Empirical Analysis, with Special

Reference to Education, National Bureau of Economic Research New York, 1975.

38. Narendra Prasad- “Economics of Education: The Real issue of Indian Economic

Development in 21st century in B.N. Singh, M.P. Shrivastava and N Prasad, “Indian Economy in

the Thirty First Century, New Delhi, Anmol Publication, 2000.

39. Richard S. Eckaus-“Education and Economic Growth”, in UNESCO, Readings in the

Economics of Education PP 571-573

40. Jandhyala B.G. Tilak- “Cost Recovery Approaches in Education in India”. Occasional

Papers, New Delhi, NEPA, 1995.

94

There is a strong relationship between education and economic

growth. Meclelland41

has found that the better educated countries in 1950

developed faster in 1952-58 period compared with the less educated

countries. Harbison and Myer’s study of 75 nations shows that the

correlation between GNP per capita and Primary School enrollment is 0.67,

between GNP per capita and Secondary school enrollment of 0.82 and

between GNP per capita third level enrollment of 0.74.42

Curle has found a

correlation of 0.64 between per capita income and post-primary enrollment.43

He has further shown that greater wealth of a nation is linked with the

percentage of national income invested in education and the correlation

between the two is 0.53. Denison and others have calculated that between

1930 and 1960, 23 percent of the growth of output in the United States was

accounted for due to increased education of the labour force. A similar

calculation made by Denison, since the period 1950, depicts that its

contribution in the United States was 15 percent, 2 percent in Germany, 12

percent in the UK, 14 percent in Belgium, 25 percent in Canada, 16.5

percent in Argentina and so on which is shown in the following Table

Number 2.14

41.David Mcclelland- “Does Education Accelerate Economic Growth, Economic

Development and Cultural Change, Vol. XIV No. 3, April 1966.

42. F. Harbison and C.A. Myres, -“Education, Manpower and Economic Growth”, New York,

Mc Graw Hill 1964.

43. A Curle-“Education, politics and Development comparative Education Review, Vol.VII,

No.3 1964

95

Table 2.14: Contributions of Education to Economic Growth

Sl.No Country Percentage contribution to

annual Growth rate

1 Canada 25.0

2 United States 15.0

3 Belgium 14.0

4 Denmark 4.0

5 France 6.0

6 Germany 2.0

7 Greece 3.0

8 Israel 4.7

9 Italy 7.0

10 Netherlands 5.0

11 Norway 7.0

12 United Kingdom 12.0

13 Former USSR 6.7

14 Argentina 16.5

15 Brazil 3.3

16 Chile 4.5

17 Colombia 4.1

18 Ecuador 4.9

19 Maxico 0.8

20 Peru 2.5

21 Venezuela 2.4

22 Korea 15.9

23 Japan 3.3

24 Malaysia 14.7

25 Philippines 10.5

26 Ghana 23.2

27 Kenya 121.4

28 Nigeria 16.0 Source: George Psacharopoulos-“Contribution of Education to Economic Growth: International

Comparisons”, in J. Kenderick (ed), International Productivity Comparisons and the causes of

the slow down- Cambridge, Mass Balinger 1984

Wheeler44

has depicted that an increase in literacy rate from 20 to 30

percent gives rise to an increase of GDP by 8 to 16 percent. Marris45

examined data for 66 developing countries in similar way and concluded that

education influences economic growth in a strong way.

44. D. Wheeler- “Human Resource Development and Economic Growth in Developing

Countries”, World Bank Staff working paper No. 407 Washington D.D. World Bank. 1980.

45. R. Marris- “Economic Growth in Cross Section” (London: Birbeck College, Department of

Economies 1982)

96

Investment in education has tangible effects on equity and alleviation

of poverty. In every country, labour earning increases with educational

attainments. Universal Primary education has important egalitarian effect. It

elevates people from literate and low income classes into a higher income

class. Similarly higher education tends to reduce the existing income

differences between the university graduates and other types of labour by

increasing the incomes of the former. Education also makes an indirect

contribution to economic growth in many ways. For instance, Easterlin

examined the relationship between education and economic growth in

twenty-five of the largest countries of the world and found that the spread of

technology in these countries could be possible because of the development

of formal schooling.46

Cochrane has pointed that education has important

links with other aspects of human resource development such as health and

fertility47

improvement in education can help alleviate poverty both directly

and indirectly by increasing income and reducing family size. The

implication of higher investment in education on women has been well

established. Higher enrollment of women in education leads to increasing

female participation in the labour force. There is also a link between

education of women and social welfare factor such as better nutrition and

lower fertility. Another important indirect effect of education is that it raises

the productivity of farmers. Studies in Korea, Malaysia, Nepal and Thailand

have shown that education raises the physical productivity of farmers. Four

years of schooling for farmers, on an average, appears to increase the output

of farmers by about eight percent. The farmers in Thailand are more likely to

use chemical inputs, improved seeds and irrigation if they had primary

education48

.

46. R. Easterlin “Why is not the whole world Developed 2” Journal of Economic History,

41, March 1981.

47. Susan H. Cochrane- “Fertility and Education: what do we Really Know”? (Baltimore:

John Hopkins University Press, 1979.

48. David T. Jamison and Laurence J.Lau-“Farmer Education and Farm Efficiency”,

Baltimoue, John Hopkins University press, 1982

97

Spending on education therefore is not simply consumption but it is

an investment in human capital. Investing on education is highly rewarding

both to society and to the individual. It has been estimated that returns on all

levels of education are about 10 percent and the return is experienced to the

tune of 30 percent as a result of investment in primary schools. The benefit

of education is accrued both by the society and the individual. An individual

who is being education earns in accordance with his or her level of

education. The society is benefited to the extent the individual’s contribution

to national income is more than the public resources spent on his or her

education.

Table 2.15 Spending on Education in Selected Countries (in Dollars)

Country G D P per

capita

Public Expenditure per Student

Primary

Education

Secondary

Education

Tertiary

Education

India 460 7.2 23.01 92.5

Pakistan 420 n.a n.a n.a

Indonesia 690 3.2 8.7 12.2

China 890 6.1 12.1 85.8

Russia 1750 n.a 20.5 15.8

Thailand 1940 12.5 12.8 38.2

South Korea 2820 14.0 17.9 7.37

Brazil 3070 12.5 12.6 72.8

Malaysia 3330 12.2 19.9 86.1

Mexico 5530 11.7 13.8 45.2

Source: Gopalji and Suman Bhakri, statistical Data on India Economy, (New Delhi: Taxmann

Allied Scrvices,2005)P.186.

98

Table 2.16: Plan-Wise Expenditure on Different Sectors of Education

(Rs. In crores) Sector

First

plan

Second

plan

Third

plan

Fourth

plan

Fifth

plan

Sixth

plan

Seventh

plan

Eight

plan

Ninth

plan

Tenth

plan

Elementary

Education

870

(58)

950

(35)

2010

(34)

8414

(50)

5913

(52)

8414

(32)

28494

(37)

103940

(48)

145233

(65.7)

287500

(65.6)

Secondary

Education

80

(5)

510

(19)

1030

(18)

_ _ 5344

(20)

18315

(24)

52311

(24)

23227

(10.5)

43250

(9.9)

Adult Education _ _ _ 126

(2)

248

(2)

1535

(6)

4696

(6)

11427

(5)

5204

(24)

12500

(2.5)

Higher Education 120

(8)

480

(18)

870

(15)

1883

(25)

3188

(28)

5604

(21)

12011

(10)

20944

(10)

22709

(10.3)

41765

(9.5)

Others 230

(15)

300

(10)

730

(12)

936

(13)

1071

(9)

2729

(11)

1980

(3)

7398

(3)

392

(1.6)

6235

(1.4)

Technical Education 210

(14)

490

(18)

1250

(21)

786

(10)

1015

(9)

2563

(10)

10833

(14)

21987

(10)

21095

(9.5)

47000

(10.7)

Total 1510

(100)

2730

(100)

5890

(100)

7474

(100)

11435

(100)

26187

(100)

76329

(100)

218001

(100)

220960

(100)

438250

(100)

Source: Gopalji and Suman Bhakri, Statistical Data on India Economy,(New Delhi: Taxmann

Allied Scrvices,2005)P.185.

Table 2.17: Literary rate among men and women in India 1951-2011

Census Year % of citerater in 7+ population Male-

Female gap Males Females Overall

1951 27.2 8.9 18.3 18.3

1961 40.4 15.4 28.3 25.0

1971 46.0 22.0 34.4 24.0

1981 56.4 29.8 43.6 26.6

1991 64.1 39.3 52.2 24.8

2001 75.3 53.7 64.8 21.6

2011 82.1 65.5 74.0 16.7

Source: Leela visaria-“India’s 15th population census some key findings”, Yojana, vol.55 July

2011

99

2.12 HEALTH:

Health is an important element of well being. Health facilities

available to a person indicate his level of living. Enjoyment of health

facilities has taken a place among the human rights’. Because of its

importance in human development Article 25 of the Universal Declaration of

Human Rights (UDHR) provides that “everyone has the right to a standard to

living adequate for the health of himself and of his family including food,

clothing, housing and medical care and social sciences”49

Article 12 of the

International Covenant on Economic social and Cultural Rights (ICESCR)

also provides that every one has the right to the enjoyment of highest

attainable standard of physical and mental health”50

World leaders realized

the urgent need for a strategy towards health enhancement at the

International conference on Primary Healthcare at Alma Ata in 1978. The

Alma Ata declaration called on countries to take urgent action to improve

primary healthcare. “The conference strong affirms that health, which is a

state of complete physical mental and social wet-being and not merely.

The absence of disease or infirmity is a fundamental human right and

that the attainment of the highest possible level of health is a most important

world wide social goal whose realization requires the action of many other

social and economic sectors in addition to the health sector”51

. consequent

upon the recognition of considerable importance health holds for human

living it has been considered a fundamental human right since the Alma Ata

Declaration of 1978.

49. The Mahabub 41 Hag Human Development Centre, Human Development in South

Assia 2004 (Karachi: Oxford University Press 2005) P. 10

50. Ibid, P 11

51. Ibid, P 146

100

Health and Economic Development:

Good health is both the means and the end of development. A healthy

population is a prerequisite for economic growth. Health is an investment for

human capital formation. Increased investment in health leads to increased

productivity of workers which ultimately gives rise to increased economic

growth. Therefore, investment in public health is viewed in terms of

economic gains arising from higher investment in health.

“Health is an engine of growth”52

Improvement in health Status

contributed in a great way to the economic growth rates in France and Great

Britain.53

According to Harvey Leibenstein better nutrition is associated with

higher productivity.54

It has been revealed that improvement in nutritional

intake alone accounts for 30 percent per capita growth in the United

Kingdom. An ADB study conducted by the Administrative Staff College of

India, Hyderabad Calculated the Malnutrition cost to India’s GDP as 3-9

percent in 1996 which comes to about 10-28 billion55

. The rapid economic

growth experience in the East Assian Countries is very much associated with

significant improvement in public health. On the country, high incidence of

disease may retard economic growth. It has been estimated that disease

burden is one of the factors responsible for Africa’s low economic

performance.

During the last one and a half century better health has boosted rates

of economic growth the world over. Better health contributes to rapid growth

in GDP per capita. Bloom, Canning and Sevilla found that one extra year of

life expectancy raises GDP per capita by about 4 percent.56

On the other hand

poor health reduces GDP per capita by reducing both labour productivity the

52. Ibid P.14

53. Ibid

54. Harvey Leibenstein, Economic Backwardness and Economic Growth (New York: Wiley

& sons, 1957)

55. Cited in Veena Rao, “Time to Call the Hugel Helpline”, The Economic Times 24

December 2004

56. “Living on the Edge”, Economic Times, 7th May 2006.

101

relative size of the labour force. Because of the substantial Macro-economic

impact of chronic diseases, such as hast diseases, stroke and diabetes, it has

been estimated that countries such as China, India and Russian Federation

could forego between $ 200 billion and $ 550 billion in national income over

the next 10 years.57

Chronic diseases reduces the quantity and productivity of

labour. Medical expenses deplete savings and investment in the education of

children. All theses reduces the earning potential of individuals, ultimately

affecting the national income. In 2005, the estimated losses in national

income from premature deaths due to heart disease, stroke and diabetes were

$ 18 billion in China, $ 11 billion in Russian Federation, $ 9 billion in India

and $ 3 billion in Brazil. The WHO has also estimated that a two percent

reduction in chronic diseases in India will result in an economic gain of $ 15

billion while it will be $ 36 billion in China and $ 20 billion a Russian

Federation.

The economic value of human capital is enhanced when its useful life

is extended. Life expectancy of a population is an important factor both in

determining the incentives to invest in various forms of human capital and

value of the stock of such capital58

Improvement in health also spurs the

economy through its effect on demography.

57. David E. Bloom, David Canning and Sevilla, “The Effect of Health on Economic

Growth: A production Function Approach world Development Vol.32, Jan 2004, PP 1-13

58. Theodore W Schultz, ‘Investing in People’ (Kerkely University of California Press 1981)

P.34

102

Table 2.18: Life Expectancy International comparison

Sl.No Country Life expectancy at

Birth

1 Bangladesh 62

2 India 63

3 Russia 66

4 Srilanka 73

5 Switzerland 80

6 USA 78

7 China 70

8 Pakistan 63 Source: World Bank, World Bank Development Report 2000 (Washington, D.C. World Bank

2001)

Women belonging to poor households have higher fertility. It is

because high infant mortality in the poor households gives like to high

fertility rates. They want to go for more children so that at least a few would

survive. An improvement in health care can lower infant mortality rate.

Table 2.19: Infant Mortality Rout: International Comparison

Sl.No Country Infant mortality rate

1 Bangladesh 51

2 India 60

3 Russia 18

4 Srilanka 17

5 Egypt 35

6 USA 07

7 China 31

8 Pakistan 84

9 Uganda 79

10 Indonesia 38

11 Vietnam 31

12 Iran 37 Source: P. Bajpai, L. Bhandari and A. Sinha, ‘Social and Economic profile of India’ (New Delhi

Social Science Press 2005) P. 46

Good health results in gains in worker productivity. There is a greater

opportunity for workers to obtain better paying jobs when they enjoy good

health. Better health enables workers to work for longer working years. The

103

most appropriate example is leprosy which affects in the prime of life. About

30 percent of those affected may be seriously deformed and their working

life will be shortened as well. A study of lepers in the urban areas of Tamil

Nadu has estimated that the elimination of deformity would more than triple

the expected annual earnings of those with jobs. The prevention of deformity

in all the 6,45000 lepers would add an estimated $ 130 million to the

countryis GNP.59

Findings of the research in Bangladesh demonstrated that

healthier workers earn more because they are productive and can get better

paying jobs.

Poor health and nutrition reduce the gains of schooling in three ways:

in enrollment, ability to learn and participation by girls, children enjoying

better health and nutrition during early childhood are more ready to enroll in

school. Health and nutrition problems also affect a child’s ability to learn in

many ways. Nutritional deficiencies in early childhood can lead to several

problems. Iron deficiency and anaemia reduce cognitive function iodine

deficiency causes irreversible mental retardation and vitamin-A deficiency is

the primary cause of blindness among children.

Decline in the incidence of disease can also create large savings in

treatment costs. The expenditure incurred to cuce diseases pay-off in a great

way. Calculations regarding the benefits of polio eradication in America

revealed that investing $ 220 million over 15 years to eliminate the disease

would prevent 2,20,000 cases and save between $ 320 million and $ 1.3

billion. The net return for the investment was a much as 12 percent in a year

59. World Bank world Development Report, 1993 (New York Oxford University Press, 1993)

P.18

104

Table 2.20: Maternal Mortality Rate (MMR) in Selected Developing

countries (Per 100000 live birth)

Sl. No Countries Maternal Mortality Rate

1 Korea 20

2 Srilanka 92

3 Malysia 41

4 Clina 56

5 Pakistan 500

6 Indonesia 230

7 India 540

8 Bangladesh 380

9 Nepal 740 Source: World Bank World Development Report 2000 (Washington, D.C. World Bank, 2001)

Table 2.21: Investment on Health During the planning periods in India

(Rs. In Crore)

Sl.No Plan period Total Plan

Investment outlay

Health

1. First Plan 1960.0 65.2(3.33)

2. Second Plan 4672.0 140.8(3.01)

3. Third Plan 8576.5 225.9(2.63)

4 Fourth Plan 15778.8 335.5(2.13)

5. Fifth Plan 39426.2 760.8(1.93)

6 Sixth Plan 109291.7 2025.2(1.57)

7. Seventh Plan 218729.6 3688.6(1.69)

8. Eighth Plan 434100.0 7494.2(1.75)

9. Ninth Plan 859200.0 19818.4(0.6)

10. Tenth Plan 1484131.3 31020.3(2.9)

Source: Government of India, Health Information of India, 2002 (New Delhi, Govt. of India

Ministry of Health and Family Welfare 2004 P.79)

105

Table 2.22: Health Expenditure in Selected Countries.

Countries Total

Expenditure on

health as of

GDP

Private expenditure on

health as of total

expenditure on

health

Government

Expenditure on

health as of total

expenditure on

health

1995 2000 1995 2000 1995 2000

Australia 8.2 8.3 32.9 27.6 67.1 72.4

Bangladesh 3.5 3.8 66.1 63.6 33.9 36.4

Brazil 7.2 8.3 57.3 59.2 42.7 46.8

Canada 9.1 9.1 28.6 28.0 71.4 72.0

China 3.9 5.3 53.3 63.4 46.7 36.6

France 9.6 9.5 23.9 24.0 76.1 76.0

Germany 10.6 10.6 23.3 24.9 76.7 75.1

India 5.0 4.9 83.8 82.2 16.2 17.8

Iran 5.6 5.5 54.4 53.7 45.6 46.3

Italy 7.4 8.1 27.8 26.3 72.2 73.7

Japan 7.0 7.8 21.8 23.3 78.2 76.7

Maxico 5.6 5.4 58.5 53.6 41.5 46.4

Nigeria 2.8 2.2 85.5 79.2 14.5 20.8

Pakistan 4.2 4.1 75.2 77.1 24.8 22.9

Phillippines 3.4 3.4 60.1 54.3 39.9 45.7

Russia 5.5 5.3 18.5 27.5 81.5 72.5

South Africa 8.4 8.8 51.3 57.8 48.7 42.2

Thailand 3.4 3.7 51.1 42.6 48.9 57.4

UK 7.0 7.3 16.1 19.0 83.9 81.0

Uganda 3.5 3.9 60.5 62.0 39.5 38.0

Tanzania 5.3 5.9 44.6 53.0 55.4 47.0

Zambia 5.2 5.6 46.9 37.9 53.1 62.1 Source: WHO, The World Health Report (Geneva:WHO, 2002) PP 202-206

106

2.12 THEORIES OF INFRASTRUCTURE AND DEVELOPMENT -

AN OVERVIEW:

The seminal discussion on the relationship between infrastructure and

economic development was put forward by Hirschman himself while he was

discussing development strategies. He commented that enlarged availability

of electric power and of transportation facilities are essential preconditions

for economic development practically everywhere (Hirschman 1958). He

went on to add that at least in this regard “we have a field where economists

have given full recognition to the principle of efficient sequence”. According

to him “investment in social overhead capital is advocated not because of its

direct effect on final output, but because it permits and in fact invites

investments to come in”. He commented later that the development strategy

to be adopted would depend upon the economic and social condition of the

region concerned.

Social overhead capital has been defined as “composing those basic

services without which primary, secondary and tertiary productive activities

cannot function”. SOC includes investments on education, public health,

communications, transportation and conventional public utilities like light,

water, power, irrigation and drainage schemes etc.

A large investment in SOC will encourage private investment later in

Directly Productive Activities (DPA). For example cheaper supply of

electrical power may encourage the establishment of small industries. Social

Overhead Capital (SOC) investments indirectly subsidies agriculture,

industry or commerce by cheapening varies inputs which they use by

reducing their costs. Unless SOC investments provide cheap or improved

services, private investments in DPA will not be encouraged. Thus SOC

approach to economic development is to ‘unbalance’ the economy so that

107

subsequently investments in DPA are stimulated. As Hirschman60

puts it,

investments in SOC are advocated not because of its direct effect on final

output, but because it permits and in fact invites DPA to come in ……. Some

SOC investment is required as a prerequisite of DPA investment.

An imbalance can also be created via DPA. A government might

directly or indirectly invest in DPA instead of investing in SOC. If

DPA investment is undertaken first, the shortage of SOC facilities is likely to

raise production costs substantially. In course of time political pressures

might stimulate investment in SOC also. Investment sequences are general

by profit expectations and political pressures profit expectations generate the

sequence from SOC to DPA and political pressures from DPA to SOC.

Hirschman calls the first sequence (from SOC to DPA) “development

via excess capacity of SOC” and the second sequence (from DPA to SOC)

“development via shortage of SOC”. As to which sequence should be

followed first for economic development, Hirschman prefers that sequences

which is “vigorously self-propelling”. This can be explained with the help of

Hirschman’s slightly modified diagram. DPA investments are measured

along the vertical axis. The curves a.b.c. are isoquants showing various

quantities of DPA and SOC which will give the same gross national product

at any point. As we move to a higher curve it represents a higher gross

national product. The curves are so drawn that the 45 line through the origin

connects the optimal points on the different curves. This line shows the

balanced growth of DPA to SOC.

60. Albert Hirshman, ‘The Strategy of Economic Development,’ New York 1958

108

If the path to development is followed via excess capacity of SOC, the

economy will follow the dotted line AA1BB

1C. When the economy increases

SOC from A to A1 the induced DPA increases to B

1 until balance is restored

at B where the whole economy is on a higher level of output. The higher

gross national product thus achieved induces government to increase SOC

further to B1

; DPA also follows suit to point C via C1.In Hirschman’s

unbalanced growth strategy, the state plays an important role in encouraging

SOC investments there by creating disequilibrium. If development starts via

investments in DPA political pressures force the state to undertake

investments in SOC.

In a situation of general pessimism, devoid of any entrepreneurial

motivation, permissive strategies of excess SOC will not be able to persuade

investors to set up DPA. On the contrary in a region of boom and dynamism,

potential investors will take the plunge when they find that SOC is available

in plenty and hence their social marginal cost is low.

This idea was echoed by Rostow61

(1960) in his Theory of stages of

Growth. According to him, SOC is a pre-condition for take off into self-

61 . W.W. Rostow- The Stages of Economic Growth-1960

Figure 2.5 Relationships between DPA and SOC

109

sustained growth. Investments in SOC and development of those services

encourage potent entrepreneurs to invest in risk bearing business. Those

SOC prepare the base for expansion of economic activities by decreasing the

cost and increasing the profitability of productive activities.

It also helps in the creation of an educated labour force, super

structure of communication networks and mechanism to provide energy,

basic civic amenities and law and order. According to Rostow, all those

create an atmosphere that breeds entrepreneurial capabilities and sustains a

climate which is throbbing with economic activities and optimistic decisions;

consequently, he made investments in SOC, especially in the fields of

transport and power, one of the main pre-conditions for take off.

Hansen, by contrast was more interested in the differential effect that

such investments would have on different socio-economic region. In what is

now famous as Hansen Thesis (1965) he commented that regions can be

classified into three types-

1. congested

2. lagging

3. intermediate

In congested areas the marginal social cost of expanding infrastructure

would outweigh the marginal social benefit. In lagging regions the dominant

economic activity is agriculture and declining industry and according to

Hansen, the economic impact of infrastructure would be negligible in such

areas. Benefits accruing from increased availability of infrastructural

facilities would be highest in the intermediate regions that do not suffer from

congestion but have access to quality raw materials, efficient labour and

wide market. Making these regions easily accessible, supplying them with

cheap and assured power and looking after the maintenance of social and

human capital of these regions would attract and retain economic activities

in these regions.

110

Paul Rosenstein-Rodan62

and Ragner Nurkse had earlier initiated

similar arguments in support of investment in overhead capital. Their version

of ‘balanced growth’ calls for simultaneous investments in large number of

activities to break the hurdle of indivisibilities, specially the lumpiness of

social overhead capital.

More recently, Aschawer63

commented that public stock of social

and economic overhead capital exerts a variety of forces upon the spatial

economy. It increases local, regional or national accessibility, infrastructure

attracts resources- both human and physical, mobile labour force settles

down on accessible areas and economic activity is attracted to these areas.

The World Development Report 1994 by the World Bank puts

infrastructure at the centre stage of development planning. It has put forward

the following arguments regarding the benefits accruing from infrastructure

and increased public investment in overhead capital.

1. Overhead capital raises productivity of other economic activities.

2. Cross national studies indicate positive significant correlation between

infrastructural facilities and economic growth.

3. Rural infrastructure leads to agriculture expansion by increasing

yields, farmers’ access to markets and availability of institutional

finance.

4. Adequate quantity and quality of infrastructure are key factors in

ability of countries to compete in global trade.

5. Infrastructure is an important factor in global rating of an economy by

multinational investors.

6. Proper infrastructural facilities can help in eradication of poverty.

7. Careful implementation of infrastructural projects is compatible with

and necessary for global environment sustainability.

62. Paul Rosenstein Rodan- ‘Theory of Big –Push’

63. Aschawer – “Is Public Expenditure Productive?" 1989

111

Thus there appears to be a strong theoretical logic supporting the view

that infrastructure or social overhead capital is a pre-condition for economic

growth and development. A fault even in the balancing of infrastructural

facilities over time, space and components will create bottlenecks in certain

sectors and excess capacity and “blocked investment” in certain other sectors

thereby creating disequilibrium in the economy. Consequently, the path and

the place of economic development will be at jeopardy. Availability of

infrastructural facilities in adequate quantity, uncompromised quality and

reliability are key factors in shaping not only the present but also the future

of a nation’s economy. Failure in providing such facilities largely reduces

productivity of economic activities and depresses general living conditions.

As a result, the process of capital formation, both physical and human suffers

a setback, leading to shortage in the future. In fact such lacuna in providing

necessary infrastructure hinders the building of the ‘structure’ itself and

holds back the economy-national or regional- within the famous Low Level

Equilibrium Trap and prevents its take off into self sustained growth

(Nelson-1956).

The role of infrastructure in fostering economic growth and enhancing

public welfare is more pronounced in developing economies like India. Here

infrastructure projects and increase in public capital outlay have a two-

pronged effect on the development process. In Hirschman’s words, it has

both ‘backward and forward linkages’. On the one hand initiation of

infrastructural projects creates demand for labour, land and other heavy

capital goods like cement, iron and steel etc. On the other hand completions

of such projects open up opportunities for a plethora of economic activities

and create a secondary level of employment creation and income generation.

Thus a new road is accompanied by expansion of transport services by local

people; a new bridge facilitates trade and commerce and a new power plant

fosters small manufacturing units. In other words the impact of expanding

112

infrastructural facilities in these countries are comprehensive and

multifaceted in nature and are not limited to providing support to other

productive activities only. In the context of overpopulated labour surplus

economies, this assumes greater significance as a large number of people can

be gainfully employed in creation of physical infrastructure and then these

facilities can lead to expansion of services and related employment

opportunities.

Thus economic theories have justified the linkage between

infrastructure and development and many of them have proceeded to

distinguish several types and forms of such linkages. This has been

accompanied by numerous studies over the years to empirically estimate the

nature and strength of the association between the two.

2.11 ROLE OF INFRASTRUCTURE IN ECONOMIC

DEVELOPMENT OF INDIA:

Economies grow and develop, they expand and advance, and they

progress and prosper. There are phases when they decline too, and there are

economies that experience continuous decay. But in all economies and in all

kinds, infrastructure facilities take predominant role. In the past, the

historical evidences show, various dynasties and the then thinkers

highlighted the need for providing infrastructure facilities like roads,

drinking water supply, irrigation, development of villages and towns etc to

achieve economic development. Kautilya64

the great thinker while explaining

the duties of the king stressed the need for construction of dams across the

river for the purpose of irrigation, construction of tanks for the purpose of

rain water harvesting, construction of small bridges etc. The Mauryan kings

took great care of the health of the people. Hospitals were built and

64. Kautilya- ‘Arthashastra’

113

maintained not only for human beings but also for animals and birds.

Elaborate rules were framed for sanitation purposes and those who violated

them were severely punished. The Mauryan rulers constructed a large

number of canals and undertook various irrigation projects. For instance a

Governor of Chandragupta Maurya was responsible for building a dam

across a river near Girinar in Western India. It was the responsibility of the

state to undertake irrigation projects and also construct and maintain public

highways. Megasthenses64

has described the highway which ran from the

North-West to Pataliputra and beyond towards the East. It was 1150 miles

long and quite wide. Trees were planted on both sides of it. Arrangements

were made for its proper maintenance. This shows the importance given to

infrastructure during those days.

During the rule of Cholas, they gave utmost importance to public

works. There were different committees to look-after different facilities. For

instance the garden supervision committee was in charge of keeping roads in

order and repairs them whenever necessary. The tank supervision committee

was in charge of constructing the tank and removing the silt from it. It had

full powers to buy land for purposes of irrigation. Thus, when we go through

the history from ancient times to modern times, we find that various rulers

realized the importance of providing infrastructural facilities for the

development of their kingdom. During the British rule though some

infrastructure facilities were provided in India, their main intention was to

safeguard the interest of the United Kingdom. Thus we had inherited an

economy, which was basically geared to the interest of our colonial masters.

“Indeed some kind of chart might be drawn up to indicate the close

connection between length of British rule and progressive growth of poverty.

That rule began with outright plunder and a land revenue system which

65. Meghasthenes-“Indica”

114

extracted the uttermost farthing not only from the living but also from the

dead cultivators. It was pure loot.”66

The rate of growth of per capita income

during the hundred years period before independence, from whatever scanty

information is available, was just 0.5 percent per annum. It has further been

noted that there were long spells when the economy actually stagnated or

declined.

Colonialism had deep impact on the slow growth of the Indian

economy. The destruction of the Indian handicrafts increased unemployment

in the rural areas. Whereas in England, surplus labour from rural areas was

quickly absorbed in new industries created in the process in industrialization,

nothing of this kind happened in India. The industrialization of Indian

economy would have deprived England of a ready market for its goods and

so the colonial interests were opposed to the development of industries in

India. Thus, labour thrown out of employment in traditional industries

imposed additional burden on subsistence agriculture. The burden of

colonialism was to be borne by agriculture. The cost of extravagant and

lavish British administration, the depreciation of Indian currency etc.

obstructed the economic development of India. In fact the colonial policy has

caused untold misery and sufferings for the economic development of India.

“The British rule was a long story of the systematic exploitation by an

imperialistic government of people whom they had enslaved by their policy

of divide and rule. The benefits of British rule were only incidental, if any.

The main motive of all British policies was to serve the interests of England.

Thus, in 1947 when the British transferred power to India, we inherited a

crippled economy with stagnant agriculture and peasantry steeped in

poverty.”67

As Jawaharlal Nehru puts it. “India was under an industrial

capitalist regime, but here economy was largely that of the pro capitalist

66. Jawaharlal Nehru- “Discovery of India”

67. Ruddar Datt & K.P.M. Sundharam ‘Indian Economy’ S.Chand and Company, New Delhi.

115

period, minus many of the wealth producing elements of that pre capitalist

economy. She became a passive agent of modern industrial capitalism

suffering all ills and with hardly any of its advantages”.68

At the dawn of

independence the policy makers faced many problems to bring up the

stagnant economy. The Government of India adopted a policy of rapid

economic development through extensive and intensive exploitation of

natural resources. Through the process of economic planning the government

has taken various strategies to gear up the speed of economic development of

India. In that process they realized the need for infrastructure development in

the economic development of India. Accordingly infrastructure development

has become the pulse of economic development. So they gave high priority

to the rapid expansion of these facilities right from the first plan itself. The

plans have generally devoted over 50 percent of the total plan outlay to

infrastructure development.

As a result of the heavy investment on infrastructure there has been

phenomenal increase in infrastructural facilities. For instance, coal

production rose from 32 million tonnes to 323 million tonnes between 1951

and 2002. During the same period power generation rose from 5 billion kwh

to 515 billion kwh; and production of petroleum from 0.4 million tonnes to

32 million tonnes. Likewise, there has been tremendous expansion in other

infrastructural facilities. The heavy investments by the Government on

infrastructural facilities will provide the necessary impetus for rapid

agricultural development and industrial expansion. In fact, without the rapid

development of the infrastructure it would not have been possible to register

the threefold rise in agricultural production and seven fold rise in industrial

production during the last five decades.

Table 2.12 : Trends in Performance of Infrastructure Sectors

68. Jawarlal Nehru- ‘Discovery of India’

116

Particulars Unit 1950-51 2000-01

Electricity Generated

All roads

Railways Route Length

Branches of Commercial Banks

Post Office (Rural and Urban)

Telephone connections

Primary Schools

Secondary Schools

Billion KWH

Kilometers

Kilometers

Numbers

Numbers

Numbers

Lakh

Lakh

6.6

3,99,942

53,596

8262

(1969)

36,234

1.7 Lakh

2.1

0.07

526.7

2500000

63221 (2004 March)

67283 (2004 March)

1,54,551

3.0 Crore

6.4

1.17

Source: Economic Survey 2001-02 & Economic Survey 2004-05

It is legal beyond doubt, that infrastructure development played a

pivotal role in the economic development of India. The following points

elaborate the role of infrastructure development in economic development of

India:

1. Infrastructure Increases Agricultural Production and Productivity:

Infrastructure enhances agricultural production and also the

productivity. Infrastructure increases the ‘comparative advantage’ of that

region in which infrastructural investment is made. When the region gains

comparative advantage in the agricultural activities, the net result is increase

in the production and productivity of various agricultural goods and services

in general. The increased level of production and productivity result in a

shift in the supply curve upwards, which has its positive implications on the

price factor depending on the nature of the elasticity of demand for the

commodity under consideration. Increased comparative advantage at the

regional level due to increased agricultural infrastructure implicitly reveals

that any less amount of investment in other regions would automatically lead

117

to “comparative disadvantage” of that region and therefore, this requires a

balanced investment in agricultural infrastructure.

2. Infrastructure Accelerates Industrial Growth:

Industrial production requires not only raw material machinery and

equipment but also a well-knit infrastructure. Private investment will not

come up to industry without proper infrastructure. Infrastructure facilities

like energy transport, banking insurance etc. acts as a boost for industrial

development. Infrastructure increases the productivity of industries. Thus,

adequate infrastructure increases the speed of industrial development. A

sound infrastructure also increases the competitiveness of the industrial

sector.

3. Infrastructure Increases the Flow of Foreign capital:

In the globalised era infrastructure facilities play an important role in

attracting foreign capital. Foreign direct investment as well as portfolio

investment will flow to those countries where adequate infrastructure

facilities are available.

4. Infrastructure Generates Employment Opportunities:

Infrastructure plays a significant role in the generation of employment

opportunities. It improves mobility, productivity and efficiency of labour.

Infrastructure is a base for larger investment, development of industry and

agriculture which in turn creates more employment opportunities.

5. Infrastructure Contributes to Tourism Development:

Tourism has emerged as an industry today. It is one of the major sources

of revenue. For proper development of tourism industry, infrastructure

development is very much required. Thus, infrastructure development plays

118

an important role in tourism development. For instance many tourist spots in

India remain unnoticed due to lack of infrastructure facilities.

6. Infrastructure and National Defence:

Infrastructure development is a must for the defence of the nation.

Proper transport and communication facilities, adequate facilities for

research and development, proper military schools etc. increase the strength

of the nation from defence perspective.

7. Infrastructure and Social Development:

Infrastructure increases the employment opportunities which in turn

increase the income level of the people. Increased income level will enhance

the standard of living of the people. Thus, infrastructure development will

change the total outlook of the society and will lead to social development.

8. Contributes to Domestic Market Development:

Infrastructural development also contributes to domestic market

development. Rural roads in the developing countries have a major effect in

improving marketing opportunities and reducing transaction costs. The

marketing of agricultural commodities can account for 25-60 per cent of

final prices of food stuffs in developing countries. About half of the

marketing costs are attributable to transport. Thus, proper infrastructure can

reduce the cost of marketing which in turn contributes to domestic market

development. Investment in infrastructure plays an important role in

supporting the development of small business and community based

initiatives, leading to direct increase in income of poor communities and

households.

119

9. Assists to Reduce Poverty:

Creation of infrastructure helps to reduce poverty. To a great extent

the poor are identified as those who are unable to consume a minimum

amount of clean water and who live in unhealthy surroundings,

consequently, they have more health problems and fewer employment

opportunities. Different infrastructure sectors have different effects on

improving the quality of life and reducing poverty. Access to clean water

and sanitation has direct consumption benefits in reducing mortality and

morbidity. It increases the productive capacity of the poor. Access to

transport can contribute to higher and more stable incomes enabling the poor

to manage risk. Transport infrastructure has been found to expand

opportunities for non-farm employment in rural areas. Improved rural

transport can also ease the introduction of improved farming practices by

lowering the costs of modern inputs. In this way infrastructure development

contributes to reduce the poverty.

10. Improves the Quality of Growth:

Enhancing the quality of growth and thereby life of the people has

been the main focus of development planning in developing countries like

India. The quality of growth can be measured in terms of improved and

equitable opportunities and choices for education, jobs, better health and

nutrition, cleaner and sustainable natural environment, trustworthy and

transparent people’s institutions, dignity, self-respect, self-esteem, freedom

etc. The infrastructure development is regarded as a means to activate this

end.

11. Contributes to Development of Backward Region:

Development of backward regions and removal of regional imbalances

is another significant contribution of infrastructural facilities. Lack of

120

infrastructural facilities in the backward regions, may act as a severe

constraint on the development of these regions. Adequate infrastructure is

the precondition for the development of these regions.

12. Instrument of Social change:

Infrastructural facilities also act as an instrument of social change.

Development of transport facilities, education, science and technology,

growth of towns and cities etc, may change the very outlook of the people.

Thus, infrastructure plays an important role in the economic

development of India. Infrastructure development is the kingpin of economic

development. The expansion of infrastructure sector boosts several other

sectors of economy. It is undoubtedly a key sector having pivotal position in

the economic development of the country.

2.12 INFRASTRUCTURE DEVELOPMENT UNDER FIVE YEAR

PLANS:

Planning is the key to development for a developing country. For a

mixed economy like India, where both public sector and private sector exist

alongside in the nation building process, the aim of the planning process is to

offer quality of life to its citizens. The national government that took charge

of economic affairs was adequately certain, that building up of a much wider

base of infrastructure was the sine qua non of development in India. The

decision was so unanimous in the intellectual circle that no debate ever

emerged regarding the indispensability or otherwise of infrastructural

development.

The majority of the benefits originating from infrastructural

enterprises accrue to the society in the form of higher output levels, higher

income levels, and higher employment level and also in the form of higher

profits to enterprises outside the infrastructural sector rather than within.

121

Since the profits and incomes are shifted elsewhere, profitability of

infrastructural sector is generally low-not only in India, but also world wide.

This characteristic creates a vexing problem that private entrepreneurs are

reluctant to invest in such projects. Moreover, such projects have not only

long gestation period but sometimes several further years of operational

losses also. Thus, our planners came to the conclusion that development of

this sector could not be left to the private capital and rightly so. Hence, the

responsibility was shouldered by the public sector and development of the

social overhead capital became the domain of the state.

The successive five year plans were formulated on those lines and the

infrastructural sectors claimed the lion’s share of plan outlays which is

depicted in the Table No 2.23

122

123

The shares were 80 percent in the First plan, dropped to 64 per cent in

the second and third and to 58 per cent in the Annul plan, and again

increased to 64 percent in the Fourth and Fifth Plans. But thereafter, it again

dropped to 62 percent in the Annual plan and 57 percent in the seventh plan.

The share increased to 58 percent in the seventh plan and 62 percent in the

eighth plan outlay marginally decreased thereafter to 61 per cent in the ninth

plan. The Tenth plan envisaged to spend about 68 percent of total plan outlay

on the infrastructural sectors. If all the plans are considered together, it is

observed that of the total outlay of Rs. 18,85,013 crores till the ninth plan,

the infrastructural sectors claimed Rs. 11,44,434 crores i.e. nearly 61 per

cent of the total. The highest share went to the transport and communication

sector followed by power sector which has really gained in importance over

the years. It has been because of such paramount importance being attached

to the development of the infrastructure in our economic planning that long

strides have been made in the physical availability of such facilities in India.

There has been a remarkable growth in the absolute level of such facilities,

as well as in the level relative to the size of the nation and population. The

table 2.24 shows some of the indicators of infrastructure in India from 1971-

2001.

124

Table 2.24 Indicators of Infrastructure in India, 1971-2001

Indicator Unit 1971 1976 1971 1986 1991 1996 2001

Irrigation intersity NIA as % of NSA 22.7 24.5 27.7 30.2 33.4 37.6 38.6

Argicultural credit Rs per primary lab 4.3 738.3 187.1 277.4 369.2 362.5 419.2

PACs No. of PACs per lakh population 35.9 28.1 18.3 16.2 13.9 9.8 9.4

Power consumption by Agricultural sector

KWH per hectare GCA 27.3 50.7 83.5 132.1 267.1 438.5 514.9

Road length km per thousand sq km area 299.5 383.1 469.6 550.4 647.3 717.8 804.5

Surfaced road length as % of total roads 43.4 43.9 45.5 46.7 51.2 55.3 57.9

Length of national and state highways as % of total roads 7.8 7.9 7.9 7.8 8.0 8.1 8.2

STC bus km run per capita 3.9 4.3 7.1 45.3 45.4 42.1 46.2

Railway length per thousand sq km 19.1 19.7 20.0 20.2 20.3 20.5 20.8

Post offices per lakh pop 14.2 19.7 20.7 19.2 17.8 16.8 15.1

Post offices per thousand sq km 25.5 38.7 45.4 47.1 48.0 49.6 50.7

Letter boxes per thousand sq km 59.3 81.5 160.0 161.5 166.4 179.5 198.9

Postal articles carried per capita 1.2 1.2 1.5 1.6 3.0 12.4 20.4

Villages electrified % 17.7 32.6 47.3 67.7 82.2 86.6 87.3

Power generation kwh per capita 101.3 133.9 164.8 226.9 318.7 412.8 482.2

Power sold kwh per capita 79.3 113.9 122.5 163.8 229.4 301.1 313.4

Commercial bank branches per thousand sq km 4.2 6.5 11.3 15.9 20.5 21.2 22.0

Commercial bank branches per lakh pop 2.3 3.3 5.1 6.5 7.6 7.2 6.8

Total bank credit advances Rs per capita 206.8 258.6 434.0 481.2 584.1 978.2 901.2

Bank credit advanced to SSIs

Rs. Per secondary worker 428.0 498.0 827.5 872.2 1014.1 2006.6 1725.1

Credit advanced by SFCs per capita 6.3 9.2 16.7 23.1 33.4 36.1 36.0

Primary Schools per ten thousand pop 7.6 6.5 7.4 7.0 6.5 7.0 6.2

Primary Schools teacher per hundred pupil 132.1 129.0 162.3 177.2 183.5 219.7 200.9

Teacher and pupil ratio in Primary School per ten thousand pop 1.6 1.6 1.6 1.5 1.4 1.4 1.6

Secondary School per thousand sq km 2.4 2.1 2.5 2.6 2.8 2.9 3.4

Secondary School Rs per capita 43.0 42.4 55.3 64.1 75.6 85.2 109.3

Expenditure on primary education

as % of total expenditure on education 10.5 11.5 14.2 15.3 16.0 16.7 22.1

Colleges per lakh pop 20.8 21.2 22.5 8.4 29.3 21.9 38.0

Colleges per thousand sq km 0.1 1.4 1.4 1.7 1.3 1.2 1.1

Hospitals and dispensaries per lakh pop 2.4 2.7 3.0 4.2 3.4 3.4 3.7

Hospitals and dispensaries per thousand sq km 2.3 2.6 3.4 4.6 3.9 4.8 3.8

Beds in hospitals and dispensaries per lakh pop 4.2 5.1 7.4 11.2 10.4 14.1 15.2

62.3 72.6 83.4 87.5 97.5 96.2 96.0

Source: “Infrastructure and Development in India” – Rajarshi Majunder PP 48, 49

125

Table 2.23 Expenditure of Infrastructural Sectors in Indian Plans-First to Tenth Plan (1951-2007)

Source: Economic Survey Government of India – Various Years

Heads of Development

First Plan

Second Plan

Third Plan

Annual plan

Fourth Plan

Fifth Plan

Annual Plan

Sixth Plan

Seventh Plan

Annual Plans

Eighth Plan

Ninth Plan

Tenth Plan

Total All Plans

1951- 56

1956- 61

1961- 66

1966- 69

1969- 74

1974- 79

1979- 80

1980- 85

1985- 90

1990- 92

1992- 97

1997- 2002

2002- 07

1951- 2002

Irrigation and flood control

434 (22.1)

430 (9.2)

665 (7.8)

471 (7.1)

1,354 (8.6)

3,877 (9.8)

1,288 (10.6)

10,930 (10)

16,590 (7.6)

8,206 (6.7)

27,398 (5.6)

63,047 (7.5)

1,03,315 (6.8)

2,38,005 (7.0)

Power 149 (7.6)

452 (9.7)

1,252 (14.6)

1,213 (18.3)

2,932 (18.6)

7,399 (18.8)

2,240 (18.4)

18,299 (16.7)

37,895 (17.3)

25,906 (21)

76,724 (15.8)

1,15,869 (13.7)

2,52,055a (16.5)

5,42,385 (16.0)

Transport and Communication

518 (26.4)

1,261 (27)

2,112 (24.6)

1,222 (18.4)

3,080 (19.5)

6870 (17.4)

2045 (16.8)

17669 (16.2)

37974 (17.4)

23951 (19.5)

101542 (20.9)

215685 (25.6)

324945 (21.3)

738874 (21.8)

Social Services 473

(24.1) 855

(18.3) 1493 (17.4)

976 (14.7)

2688 (17)

6834 (17.3)

1968 (16.2)

15917 (14.6)

34960 (16)

19906 (16.2)

88804 (18.3)

199766 (23.7)

347391 (22.8)

722031 (21.3)

Education 149 (7.6)

273 (5.8)

661 (7.7)

354 (5.3)

905 (5.7)

1710 (4.3)

354 (2.9)

2977 (2.7)

7686 (3.5)

4916 (4)

21597 (4.4)

52173 (6.2) b

737550 (5)

Medical Public Health & family welfare

98 (98)

228 (4.9)

251 (2.9)

140 (2.1)

336 (2.1)

761 (1.9)

223 (1.8)

3412 (3.1)

6809 (3.1)

3771 (3.1)

14105 (2.9)

34387 (4.1) b

645210 (3.5)

Other Social services

226 (11.5)

354 (7.6)

581 (6.8)

482 (7.3)

1447 (9.2)

4363 (11.1)

1390 (11.4)

9528 (8.7)

20465 (9.4)

11219 (9.1)

53091 (10.9)

113206 (13.4) b

216352c (11.6)

Infrastructure (1+2+3+4) 1574 2998 5522 3882 10054 24980 7541 62814 127418 77967 298468 594367 1027706a 2245291

Total Plan Outlay 1960 4672 8577 6625 15779 39426 12177 109292 218730 123120 485455 844031 1525639 3395483

Infrastructure as % of total 80.3 64.2 64.4 58.6 63.7 63.4 61.9 57.5 58.3 63.3 61.5 70.4 67.4 66.1

122

Table 2.26 Indicators of Infrastructure – Global Comparisons

Country

GNP Per

Capita Area Populatio

n

Installed

Power Capacit

y

Power Generate

d

Telephone Main lines

Railway

Total Road Lengt

h

Surfaced Road Length

Surfaced Road

Length Density

on Roads

NIA as % of total

cropped area

Access to safe drinking water

physicians

Primary Teachers

US $

1,000 sq km million

kw per million populat

ion

KWH per milliom

popuation

Per thousand populatio

n km per 1000 sq km

area

% of total road

length

km per million

population

% of populat

ion

Per million populat

ion

per 1000 populatio

n

Bangaladesh 220 144 114.4 22.03 22.03 2,113 19 94 55 58.5 118.3 20.4 78 NA 16

India 310 3,288 883.6 86.01 84.54 5,743 18 599 291 48.6 2229 13.8 73 406 17

Kenya 310 580 25.7 28.13 28.13 6,811 4 105 21 20 2,396.60 0.1 49 98 32

Pakistan 420 796 119.3 78.35 76.59 7,069 11 212 64 30.2 1414.5 21.3 55 340 24

China 470 9,561 1,162.20 118.7 118.7 5,894 5 107 21 19.6 880.3 4.9 72 NA 45

Low Income 390 38,929 3,191.30 NA 53 6 NA NA NA NA 396 NA 62 89 26

Indonesia 670 1,905 184.3 70.1 62.29 5,785 3 149 62 43.6 1540.1 4.3 34 142 43

Philippines 770 300 64.3 109.2 106.8 9,487 1 535 77 14.4 2496.1 5.2 81 123 30

Middle income 2490 62,470 1418.7 NA 373 81 NA NA NA NA 1335 NA 74 495 40

Australia 17260 7,713 17.5 2058 2102 444,965 4 105 37 35.2 46278 0.2 100 NA 59

UK 17790 245 57.8 1263 1264 438,893 67 1455 1455 100 6167.4 0.7 100 NA 50

Canada 20710 9,976 27.4 3801 3801 558,241 8 82 28 34.1 29855.2 0.1 100 2222 67

USA 23240 9,373 255.4 2871 3036 533,817 22 666 387 58.1 24441.7 2 100 2381 NA

Japan 28190 378 124.5 1564 1564 437,975 53 2962 2040 68.9 8993.1 7.5 96 1639 48

High Income 22160 31,709 828.1 NA 2100 442 NA NA NA NA 10106 NA 96 2381 59

Source: World Development Report 2002 and Economic Survey of India – Various Years

125