Focus on rural infrastructure

The World Bank’s country assistance strategy (CAS) for India, 2009-2012 comes at a momentous phase. The focus on boosting investments in infrastructure and reducing inequalities is back on the economic agenda both globally and within India. The proposed $14 billion lending programme for the next three years is in line with national priorities, even if it is short of projected requirements. Quite independent of the global economic meltdown, India’s neglect of its physical infrastructure has been a malaise demanding radical treatment. This time of economic troubles serves to heighten the sense of urgency. Given the positive linkages between physical infrastructure and equitable growth, the country can ill afford any further neglect of the task of building decent infrastructure. The urgency behind investment in infrastructure is two-fold: its immediate pump-priming effect, and the longer-term importance of sustaining and boosting India’s high growth trajectory.

The infrastructure deficit is a major reason for India’s inability to spread the benefits of growth. For instance, even the 8+ per cent growth does not translate into much for the hundreds of millions of Indians who live below the official poverty line. That 40 per cent of India’s villages are not connected to a road is a shocking expression of India’s infrastructure deficit. Rural infrastructure should be a priority area as it will help narrow the urban-rural divide. One of the objectives of the Eleventh Plan is to construct 130,000 km of new rural roads. The Plan has earmarked nearly 30 per cent of the public investment (Rs.4,35,349 crore) for rural infrastructure development. A strong, focussed push in this area should be central to the country’s larger development plans.UNCTAD has estimated that to support an annual GDP growth of 9 per cent, India would need investment averaging $99 billion a year between 2007 and 2012 in 10 major infrastructure segments. Seen in this wider context, even with the World Bank’s proposed assistance, overall investment will fall short of the country’s infrastructure needs. Whatever the 15th general election may bring in five months, a key challenge for India’s planners will be to evolve strategies to bridge the infrastructure investment gap needed to fast-track development and, to an extent at least, even out growth.

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