Infrastructure is a key driver of the overall development of Indian economy. It is seen that investments in infrastructure equal to 1% of GDP will result in GDP growth of at least 2% as infrastructure has a “multiplier effect” on economic growth across sectors. The recent headway made in developing transport infrastructure will prove to be the biggest enabler for growth.

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The critical role of finance in economic growth is widely acknowledged and developing well-functioning financial markets has become a central focus of economic policies across the world. A new World Bank study suggests that investing in infrastructure in regions with basic financial development can help these regions overcome barriers to economic growth.

The role played by transport infrastructures in developing financial markets vis-à-vis economic growth:

• Infrastructure development helps in poverty reduction due to its high employment elasticity leading to huge job creation capabilities.
• It also has the trickle-down effect as better transportation infra can lead to access to education, health and other basic necessities.
• Increasing the manufacturing growth as there is better connectivity, easier movement of goods and services, facilitating private investments
• It reduces the regional and inter-state disparities and leads to a balanced economic growth by regional equality.
• Infra sector has huge spill-over effects on other sectors of economy. It has money-multiplier effect too.
• Better quantity and quality of infrastructure can directly raise the productivity of human and physical capital and in turn growth of nation.

The progresses made in creating an efficient transport infrastructure in the country are

• At the highest ever pace of construction, more than 35,000 km of national highways has been built in last four and a half years.
• World-class expressways such as the Eastern Peripheral Expressway and Western Peripheral Expressway.
• Technologically sound projects which are engineering marvels such as the Dhola-Sadiya Bridge, Chenani Nashri Tunnel and Bogi-Beel bridge.
• The Bharatmala Pariyojana is unique and unprecedented in terms of its size and design, as is the idea of developing ports as engines of growth under Sagarmala.
• The development of 111 waterways for transport, FASTags for quicker toll payment and movement of vehicles on highways.
• The promotion of alternative fuels such as ethanol, methanol, biofuels, and electricity, as well as innovative modes of travel such as seaplanes and aeroboats. The concept of ‘waste to wealth’ is being employed for generating alternative fuels.
• Measures are taken to enhance road safety like the Motor Vehicles Amendment Bill, The Good Samaritan law etc, reducing congestion and pollution levels and providing roadside amenities.
• Connectivity to our neighbouring countries using an optimal mix of roads and waterways lie Afghanistan and beyond through Chahbahar, or Bangladesh, Myanmar and Thailand through upcoming highways and waterways.
• A memorandum of understanding (MoU) has been signed with Austrian ropeway company Doppelmayr for building ropeways through congested cities and hilly areas.

Impact of infrastructure projects on financial markets:

• Infrastructure investment can help financial markets converge towards more developed regions.
• Financial markets respond to large infrastructure investments and helps spur real economic outcomes contingent on initial financial sector development.
• Consequently, areas with high initial financial sector development will play an important role in determining where economic activity will grow.
• Caution must be taken against simply investing in large-scale infrastructure and hoping that this will automatically develop financial markets.

Case study: the construction of India’s Golden Quadrilateral central highway network, together with comprehensive loan data from the Reserve Bank of India, the study finds a disproportionate increase in the number of loans disbursed and average loan size in newly connected districts along India’s Golden Quadrilateral network. The improved transportation infrastructure results in increased economic activity which in turn increases bank lending. Importantly, the authors find that these effects were stronger in districts where the banking sector and financial institutions were already sufficiently developed

Conclusion:

An efficient transport infrastructure is the biggest enabler for growth. India’s growth story should no longer be impeded by a lack of efficient transport infrastructure, and the fruits of this growth should reach everyone in the remotest part of the country.