Importance Of Infrastructure In Economic Development

Abstract:

Infrastructure is indispensable to achieve the main development targets in developing countries, such as urbanization, industrialization, export promotion, equitable income distribution, and sustainable economic development. Late developing countries can benefit from previous development experience provided they choose the right model. However, the precise relationship between infrastructure and economic growth is still frequently debated. In this paper we will try to highlight how the economy in the very long run benefits from infrastructural development both economically and socially.

Introduction:

Infrastructure maybe defined as the basic physical systems of a business or nation. Transportation, communication, sewage, water, health,

Therefore, infrastructure development is one of the most integral parts of the public policies in developing countries. India is one of the fastest growing economies in the world. India’s economy is big and is getting bigger. Estimates prove that India will become the world’s third largest economy by 2050. Liberalisation of government regulations and a deliberate strategy of the Indian Government promotes infrastructure. “The link between infrastructure and economic development is not a once and 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 fulfil our declared objectives of generating a self-accelerating process of economic development.” quoting Dr. V. K. R. V. Rao [noted Indian economist, early 1980s]. The Indian economy is still expanding significantly, and substantial investment in infrastructure continues to be required in order to sustain India’s economic

In the latter, it is determined endogenously.Endogenous growth theory holds that economic growth is primarily the result of endogenous and not external forces. Endogenous growth theory holds that investment in human capital and knowledge are significant contributors to economic growth .In the mid-1980s, a group of growth theorists became increasingly dissatisfied with common accounts of exogenous factors determining long-run growth. They favoured a model that replaced the exogenous growth variable (unexplained technical progress) with a model in which the key determinants of growth were explicit in the model. In neo-classical growth models, the long-run rate of growth is exogenously determined by either the savings rate (the Harrod-Domar Model) or the rate of technical progress (Solow Model). However, the savings rate and rate of technological progress remain unexplained. Endogenous growth theory tries to overcome this shortcoming by building macroeconomic models out of microeconomic foundations. Households are assumed to maximize utility subject to budget constraints while firms maximize profits. Crucial importance is usually given to the