Infrastructure development plays a pivotal role in driving long-term economic growth by enhancing productivity, improving living standards, and fostering sustainable expansion. Classical and neoclassical theories highlight the importance of infrastructure in increasing the productive capacity of an economy, as efficient transportation, communication networks, and energy distribution systems reduce operational costs and enhance competitiveness. Meanwhile, endogenous growth theory emphasizes the role of infrastructure investments in promoting technological innovation and human capital development, with education and research facilities sparking innovations that propel growth. Furthermore, the new economic geography underscores infrastructure's significance in connecting remote areas with economic hubs, facilitating regional development, and ensuring more balanced economic growth across different regions.
For sustainable economic advancement, the focus should be on infrastructure projects with high multiplier effects, such as transportation networks, renewable energy sources, water and sanitation systems, digital infrastructure, and educational and health facilities. These investments not only provide immediate employment opportunities and stimulate economic demand but also lay the groundwork for future prosperity by boosting efficiency, innovation, and human capital. Such strategic infrastructure development is essential for achieving long-term economic objectives, as it not only meets immediate needs but also addresses future challenges and opportunities.
The critique of short-term, inefficient investments, illustrated by Keynes' metaphor of "digging holes and filling them up again," underscores the necessity of prioritizing projects that yield substantial and enduring economic benefits. While Keynes advocated for government spending to stimulate demand during downturns, he cautioned against wasteful expenditures. Instead, the emphasis should be on sustainable infrastructure projects that not only provide a short-term economic boost but also contribute to long-term growth by enhancing the overall productivity and competitiveness of the economy. This approach aligns with broader economic theories that stress the critical role of strategic infrastructure investment in supporting long-term development, innovation, and equitable regional growth.
This is precisely what the Narendra Modi government has done. Since Narendra Modi took office in 2014, infrastructure development has been a cornerstone of his government's economic strategy, significantly impacting India's growth trajectory. The Modi administration has prioritized large-scale infrastructure projects, including the development of highways, railways, airports, smart cities, and digital infrastructure, with the aim of enhancing connectivity, improving efficiency, and attracting investment.
By 2023, the national highway network had increased by 60% from its extent in 2014, showcasing the government's commitment to infrastructure development. Specifically, the length of national highways increased from 91,287 km in 2014 to 146,145 km by 2023. The pace of construction has been noteworthy, with the Ministry of Road Transport and Highways maintaining a construction pace of 20.78 km per day during the first seven months of the financial year 2023-24. This is part of a broader initiative to construct 12,500 km of highways within the year. For context, the annual highway construction achievements in the years leading up to 2023 included 10,237 km in 2019-20, 13,327 km in 2020-21, and 10,457 km in 2021-22. This marked increase in highway construction under the Modi government contrasts with the pace before 2014, indicating a robust focus on building infrastructure as a means to bolster economic growth and connectivity across the country.
These efforts are part of the larger Bharatmala Pariyojana, an ambitious program aimed at developing about 34,800 km of highways across India. The initiative reflects the government's strategy to improve transportation, facilitate trade, and enhance accessibility, thereby contributing to the nation's socio-economic development.
Similarly, since 2014, the Indian Railways has embarked on a transformative journey, marked by significant increases in capital expenditure and ambitious modernization efforts. The period has seen record investments in railway infrastructure, including the rollout of modern Vande Bharat Express trains, accelerated station redevelopment under the Amrit Bharat scheme, and a notable push towards electrification and track laying. The Gross Budgetary Support (GBS) for the railways saw a quantum leap in 2023-24, reaching Rs 2.4 lakh crore, highlighting the government's commitment to enhancing the rail network's capacity and efficiency. This investment is a substantial increase from previous years, demonstrating a strategic focus on leveraging the railways to drive economic growth and improve connectivity across the country.
In contrast, the period before 2014, under the UPA government, saw more modest investments in railway infrastructure. The GBS in the railway budget for 2004-05 was Rs 8,000 crore, and for 2013-14 it was Rs 29,055 crore, indicating a more conservative approach to railway development. The Modi government's approach marks a significant departure from the past, focusing not just on expanding the rail network but also on modernizing it with advanced technology and services. This includes the extensive rollout of Vande Bharat trains, which are indigenously designed semi-high speed trains, and the fast-tracking of major infrastructure projects like the redevelopment of stations and the laying of new tracks. The emphasis on modernization and high-capacity infrastructure reflects a strategic shift towards making Indian Railways a world-class transporter, ready to meet the future demands of a rapidly growing economy.
Further, the union government is also addressing the regional infrastructure development disparity. Since 2014, the Indian government has significantly increased infrastructure development in the North Eastern Region (NER), marking a substantial shift from the initiatives undertaken prior to 2014 under the UPA government. An impressive sum of Rs. 3.84 lakh crore has been allocated by 55 non-exempted Central Ministries/Departments for infrastructure projects in the NER, including Assam, leveraging at least 10% of their Gross Budgetary Support (GBS) for this purpose. This expenditure has facilitated a wide range of projects, from road construction, where 4,121 km of road projects have been completed, to the sanctioning of Rs. 19,855 crore for new rail projects, enhancing both road and rail connectivity in the region. Moreover, the telecommunications infrastructure has been bolstered with the installation of 1,358 towers covering 1,246 villages, and 1,195 projects worth Rs. 15,375 crore have been sanctioned under the schemes of MDoNER and NEC in the NER States, including Assam, from 2014-2022.
The approach contrasts starkly with the period before 2014, where infrastructure development in the NER was less pronounced and less integrated. The comprehensive and multi-modal nature of the projects initiated since 2014-encompassing road, rail, air, waterway, telecom, and power connectivity-reflects a more holistic and concerted effort to bring the NER into the mainstream of national development. The focus has not only been on enhancing connectivity but also on ensuring that these infrastructure developments are sustainable and cater to the long-term needs of the region, thus setting a new precedent for focused regional development in India.
In the power sector, India has made remarkable strides, transitioning from a power deficit to a power surplus nation. The average availability of power has significantly improved, reaching 20.5 hours in rural areas and 23.5 hours in urban areas. This achievement is poised to make generating sets and stabilizers a thing of the past. Additionally, India has become a global leader in the cost-effective production of renewable energy, boasting the cheapest renewable energy production costs worldwide. This focus on renewable energy is part of India's broader commitment to sustainable development and energy security. The nation has achieved its NDC target of having 40% of its installed electricity capacity from non-fossil fuel sources nine years ahead of schedule, in 2021. This achievement underscores India's commitment to combating climate change and transitioning towards a green economy. The rapid expansion in solar capacity, which has increased 23-fold since 2014, along with the distribution of nearly 90 lakh solar lighting systems, reflects the government's focus on harnessing solar energy to meet its power needs. Furthermore, the deployment of over 5.3 lakh solar pumps to farmers signifies a push towards sustainable agricultural practices. The reduction in solar tariffs to below Rs. 2 per unit highlights the economic viability of renewable energy, making it an attractive investment and further driving India's renewable energy sector forward. This concerted push towards renewable energy is a key component of India's infrastructure development, aligning with global sustainability goals and ensuring energy security for future generations.
Alongside the notable advancements in power and transportation infrastructure, India's focus on telecommunications and digital infrastructure has been transformative. The government's efforts have led to a drastic reduction in mobile data tariffs, from Rs 269 per GB in 2014 to Rs 10.1 per GB, making digital connectivity more accessible to a broader segment of the population. This reduction in costs has spurred a remarkable increase in data consumption, which has grown 63 times, and the number of mobile broadband subscribers has expanded more than 17 times. Such developments are pivotal in driving India's digital revolution, making information and digital services more accessible and fostering inclusive growth.
The comprehensive approach to infrastructure development under PM Modi's leadership reflects a strategic vision to transform India into a developed nation with future-ready infrastructure. This vision encompasses not just the physical infrastructure but also the digital and energy landscapes, ensuring that India's growth is sustainable, inclusive, and resilient. The government's concerted efforts in these areas are setting the foundation for a new era of prosperity and global competitiveness for India.
Bibek Debroy is the Chairman, Economic Advisory Council to the Prime Minister (EAC-PM) & Aditya Sinha is Additional Private Secretary (Policy & Research), EAC-PM.
Disclaimer: These are the personal opinions of the author.