The key to infrastructure development

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We need to wait and see how the new Government in 2014 will coordinate both public and private sector allocation across the ‘districts’ as opposed to ‘states’ in order to minimise the differences in key infrastructure facilities between the waning and the accelerating regions within a state. Therein lies our success, writes Dr. Buddhadeb Ghosh.

Infrastructure is another name of social capital consisting of special categories of inputs external to the decision-making units (DMU), which contribute to socioeconomic development both by increasing productivity and by providing facilities thereby enhancing the quality of life and efficacy of labour as well as machinery. Traditionally, it is a kind of public utility service generated by the government over a long period of time which facilitates faster, cheaper and easier mobility of both material and labour thereby generating
economic activities. In a sense, therefore, it is a sort of external economy to be used and enjoyed by all. It has many different forms such as road, rail, port, electricity, irrigation, communication, play ground, educational institutes, health centre, sanitation, environment, rule of law, banking and the like. But the idea is not at all new. There are innumerable examples of road, well, road side rest house, playground, learning centres etc. since the time of Chanakya Kautilya (Arthashashtra) and Chandragupta Maurya way back in 4th century BCE. What is new is its academic recognition in the 20th century particularly since the works of Gunnnar Myrdal and A.O. Hirschman during 1950s, and subsequent efforts at privatisation of the services.

Infrastructure – the key to development

In India, the academic thrust on infrastructure began only in late 1990s. Beyond the traditional economic simplification of classifying different factors into capital and labour, an economy’s infrastructure network is the very socioeconomic climate created by the institutions that serve as conduits of commerce, industry and overall standard of living. Some of these institutions are public, others private. In either case, their roles can be conversionary—helping to transform resources into outputs—or diversionary—transferring resources to nonproducers.

The dominant presence of public sector in generating infrastructure services is guided by two fundamental motives of the welfare state: social equalizer and market failures. The first is related to redistribution objective thereby penalizing the efficient citizens while the second tries to safeguard the society in times of market failure. It justifies government intervention particularly in the less developed countries (LDCs) where markets may very often fail to produce an efficient outcome.

The Eleventh Plan (2007-12) in Chapter-7 on Spatial Development and Regional Imbalances has boldly mentioned that “As the Eleventh Plan commences, a widespread perception all over the country is that disparities among States, and regions within States, between urban and rural areas, and between various sections of the community, have been steadily increasing in the past few years and that the gains of the rapid growth witnessed in this period have not reached all parts of the country and all sections of the people in an equitable manner.” According to ADB’s (Asian Development Bank) report on Infrastructure for Supporting Inclusive Growth and Poverty Reduction in Asia (2012), “It is, however, relatively well established that infrastructure can promote inclusive growth, which in turn will reduce poverty directly and indirectly.

This can be inferred from the fact that infrastructure development will (i) create additional jobs and economic activities, (ii) reduce production costs through improvements in transport and connectivity, (iii) expand overall production capacity, (iv) provide better connections to markets and other economic facilities, and (v) improve access to key facilities.

The roadblocks

Theoretically speaking, this appears a nice proposition for the perfect or semi-perfect or homogeneous economic societies of Japan, Western Europe, USA, Australia and the like, where socio-economic inequality is tolerably low and regional disparities are not severe to begin with as compared with India. In a country like India, where at least 50% people (equivalent to 60 crores as per the estimate of this writer from NSSO (National Sample Survey Organisation)) unit level household data for 2009-10) are vulnerable, illiterate and incredibly unskilled, availability of such public infrastructure facilities can neither pull in these misfortunate people into the gamut of “rising India”, nor can it help establish a stable India. India is composed of about 627 districts, not just 30 states. A recent study sponsored by Ministry of Statistics & Programme Implementation (MOSPI) to estimate the first district level development index under the leadership of this writer, has proved that except the “group of five” states namely Kerala, Punjab, Haryana, Gujarat and Himachal Pradesh, development is mostly concentrated around the state capital across the states. This is particularly true in West Bengal, Maharashtra and the Central Indian states, though Maharashtra has many developed urban agglomeration dispersed across the state.

Absence of such facilities in a region may result in lower ‘‘productive efficiency’’ of the local population. Interestingly, these characteristics are substantial enough to explain most, if not all, of the differences in prosperity that separate the states today. Moreover, relative scarcity of these facilities in more than 200 districts is responsible for the recent emergence of intense district level divergence, which is the root of rising insurgency in states like Madhya Pradesh, Andhra Pradesh, West Bengal, Chhattisgarh, Jharkhand, Bihar and Maharashtra. The linkage between infrastructure and economic growth is multiple and complex. By sheer “historical accident” of having a large infrastructure project ultimately create a ‘‘backwash effect’’ against the waning regions and in favour of the fortunate regions. The residents living in the respective regions suffer or gain accordingly.

Even if the root cause of the failure lies in the lower purchasing power of the vast mass of alienated poor, illiterate and unskilled Indians living in remote rural areas far away from the state capitals, the ghost must be hidden in the “jungle of governance”.

Spatial development policies needed for inclusive growth

What’s the linkage between infrastructure and “inclusive growth”? How the issue of “inclusive growth” gets nullified in spite of planning through public industrialisation pursued during 1950s and 1960s?

Ever since the beginning of the process of economic reforms in early 1990s, India has been facing the classic conflict between growth and social justice which has resulted in an unprecedented rise of internal insurgency from Eastern to Central to Southern regions. At one point about four years ago the Prime Minister had to declare that India’s “internal menace” is stronger than “external threat”. This is quite suggestive. So “inclusive growth” has not automatically resulted from physical infrastructure facilities developed over the decades through decentralised implementation process. Even if the root cause of the failure lies in the lower purchasing power of the vast mass of alienated poor, illiterate and unskilled Indians living in remote rural areas far away from the state capitals, the ghost must be hidden in the “jungle of governance”.

The fundamental cause of widespread failure of “inclusive growth” across India except the five states has been the complete lack of appropriate spatial development policies on the basis of agro-geo-climatic conditions as in 78 NSS regions during the period of economic reforms. Globalisation is good for unleashing the growth potentials of the educated and skilled Indians particularly those living in urban areas. But it creates an intense momentum towards socio-economic polarization between skilled and unskilled in backward regions. While moving across 400 plus districts in connection with GOI’s works on SDI (Social Development Index), BADP (Border Area Development Programmes) and MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) from Mizoram border to Rajasthan border and from the villages of Ladakh to those around Kanyakumari, this author has recorded intense resentment among the rural masses towards the existing governance system. Many have expressed extreme despair, others have sounded hope towards wave of change.

Most people feel that the rural poor are ignored even by those enjoying power in rural areas. The gypsy camp vanishes into the blue everywhere. Second, existing policies based upon national and state level averages fail to synchronize between the varying perceptions of what is meant by development by different communities in different localities even within a state. For example, the condition of the people living in Kalahandi or Dantewada district who do not get two meals cannot be improved by providing schools. Or, a recently electrified village in the district of Purulia in West Bengal will hardly care for internet facility. Or, the general public around Kolkata who perennially suffers from lack of traffic regulations and overcrowded roads cannot get any welfare improvements from India’s achievement in the field of software. In general, people who live marginally from hand to mouth (50% or 60 crores) will have altogether different perceptions of development from those who are much well-placed like us and left the village in their college days. Above all, the evils of a multi-party chaos have started exerting their rhetoric on the system of economic administration.

Although breakdown of a single party system has paved the way for rising ‘‘local voices’’, almost all resident sensible Indians have become disgusted on the diminished role of development ethics in the emerging coalitional political buccaneering at all layers of administration the extreme of which is represented in some of the large states where “governance” has reached the nadir. See the ruin of Bengal after phenomenal rise to power and spoiling the democratic institutions over 33 years without any respect for democratic values. The stories of UP, Bihar, MP, Chhattisgarh, Jharkhand and Orissa will also resemble other hypotheses. But the outcome is same. Some became richer, others perished. Our widespread empirical experience shows that if there is a sudden drought, or flood, or accidental death or disease of the head of household, or loss of a buffalo or a cow, the family again gets pushed = below the poverty line forever in the absence of any accessible common social capital or social security. So urgent steps must be taken to help reach development funds meant for the vulnerable people settled in the unfortunate regions, or social capital must be created in order to usher into a ‘collective development spirit in these utterly deprived regions and among the excluded people.

Rural concerns in infrastructure

The central government tried to reach the alienated masses in vast rural areas through the world’s largest rural development project MGNREGA, which assures 100 days work to any individual who applies for a job card by direct involvement in creating 10 types of rural infrastructure assets like rural connectivity, irrigation canal, irrigation facilities, flood control, water conservation & water harvesting, renovation of traditional water bodies, drought proofing, land development, Rajiv Gandhi Seva Kendra and others. In 2012-13, six other new assets were proposed such as agriculture related works, livestock related works, fisheries, coastal area needs, rural drinking water and rural sanitation works. This was doubtless a great mission after Atal Bihari Vajpayee’s National Highway Networks popularly known as Golden Quadrilateral. But given the fund spent on MGNREGA amounting to more than Rupees two lakh crores, its success is limited, even though it became so popular that different regions have coined different terms such as “100 days work”, “NREGA” etc. India has a golden opportunity to become the best nation in the world. Our success will depend on how the new Government in 2014 will coordinate both public and private sector allocation across the ‘districts’ as opposed to ‘states’ in order to minimise the differences in key infrastructure facilities between the waning and the accelerating regions within a state.


Dr.-Buddhadeb-Ghosh

Dr. Buddhadeb Ghosh

The writer is Principal Investigator for MGNREGA and Border Area Development Programme (BADP) Projects, Planning Commission, GOI, New Delhi and Associate Scientist, Economic Research Unit at Indian Statistical Institute, Kolkata.

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