GOVERNMENT ROLE IN

INFRASTRUCTURE

Subject- Law on Infrastructure Development

Professor- Adv. Kamaljit Singh

Submitted by-
Bhuvnesh Khatri (24)

NMIMS, V. L, Pherozeshah Mehta Rd, Vile Parle West, Mumbai, Maharashtra 400056

INTRODUCTION
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India’s rise in recent years is a most prominent development in the world
economy. India has re-emerged as one of the fastest growing economies in the
world. India’s growth, particularly in manufacturing and services, has boosted
the sentiments, both within country and abroad. With an upsurge in investment
and robust macroeconomic fundamentals, the future outlook for India is
distinctly upbeat. According to many commentators, India could unleash its full
potentials, provided it improves the infrastructure facilities, which are at present
not sufficient to meet the growing demand of the economy. Failing to improve
the country’s infrastructure will slow down India’s growth process. Therefore,
Indian government’s first priority is rising to the challenge of maintaining and
managing high growth through investment in infrastructure sector, among
others.
GOVERNMENT’S ROLE
The role of government in infrastructure development is crucial for the overall
economic growth, societal well-being, and the enhancement of a nation's
competitiveness. Infrastructure refers to the basic physical and organizational
structures and facilities needed for the operation of a society, such as
transportation systems, energy networks, communication systems, water supply,
and public facilities.
Investment and Funding: Governments play a primary role in financing and
investing in infrastructure projects. Large-scale projects often require substantial
financial resources that may not be viable for private entities alone.
Governments can mobilize funds through taxes, bonds, grants, and partnerships
with the private sector.
Policy and Regulation: Governments establish policies, regulations, and
standards to guide the planning, development, and operation of infrastructure.
Clear and effective policies can create an environment conducive to private
investment, innovation, and sustainable development.
Planning and Coordination: Government agencies are responsible for long-
term planning, prioritization, and coordination of infrastructure projects. This
involves assessing the needs of the population, identifying strategic priorities,
and ensuring a balance between different sectors of infrastructure.
Risk Management: Infrastructure projects often involve significant risks,
including financial, environmental, and social risks. Governments are
responsible for managing these risks by implementing appropriate regulations,
conducting impact assessments, and developing contingency plans.

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Public-Private Partnerships (PPPs): Governments can collaborate with
private entities through PPPs to finance, design, build, and operate
infrastructure projects. This allows for sharing the risks and responsibilities,
leveraging private sector expertise, and promoting efficiency in project delivery.
Maintenance and Upkeep: In addition to the initial development, governments
are responsible for the ongoing maintenance and upkeep of infrastructure to
ensure its longevity and functionality. Regular maintenance is essential to
prevent deterioration and ensure the safety and efficiency of the infrastructure.
Social Equity: Governments play a role in ensuring that infrastructure
development benefits all segments of society. This includes addressing issues of
accessibility, affordability, and inclusivity to avoid creating disparities in access
to essential services.
Environmental Sustainability: Governments should consider the
environmental impact of infrastructure projects. Sustainable development
practices, such as incorporating green technologies and minimizing
environmental degradation, are increasingly important in modern infrastructure
planning.
Emergency Response and Resilience: Governments need to plan for and
respond to natural disasters, emergencies, and other disruptions that may affect
infrastructure. Building resilience into infrastructure can mitigate the impact of
such events and ensure a rapid recovery.

ROLE OF INDIAN GOVERNEMENT IN DEVELOPMENT OF

INFRASTRUCTURE
The Indian government focuses on India’s infrastructural needs and has
developed various schemes and policies in this regard. The National
Infrastructure Pipeline (NIP), introduced in 2019 emphasizes social and
infrastructure projects including energy, roads, railways, and urban development
projects worth INR 102 lakh crores. The Centre and States have nearly equal
contribution (39% and 40%) while the private sector has a 21% share. NIP is
complemented by the PM GatiShakti Master Plan which is dedicated to
improving India’s logistics network. In India Budget 2023-24, the Indian
government emphasized the need for increased spending in the infrastructure
sector and nearly trebled its infrastructure spending to 3.3% of GDP compared
to its spending in 2019-20. The Budget has allocated INR 75000 crores for 100
projects deemed critical to improving the overall multimodal logistics
infrastructure.
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Infrastructure development requires the involvement of multiple stakeholders
for the overall growth of the society. Thus, the Indian infrastructure sector
primarily utilises the Public-Private Partnership (PPP) approach. As per the
Department of Economic Affairs, India has taken a systematic approach to
create a robust PPP program for “delivery of high-priority public utilities and
infrastructure.” With “close to 2000 PPP projects in various stages of
implementation, India’s program is one of the largest in the world according to
the World Bank.” Under PPP, infrastructure is developed under the “Build-
Operate-Transfer (BOT)” model and the private sector is incentivised to build
and maintain the infrastructure effectively so that more and more people use it
which would provide revenue to the private sector.
The government has advised and provided financial resources to over 16
different ministries to create infrastructure under PPP. The goal is to create a
seamless supply chain for the movement of goods and services. The National
Logistics Policy (NLP) announced in 2022 formalizes this approach and aims to
reduce the logistics cost in India to under 10% and be one of the top 25
countries in the world in the Logistics Performance Index ranking. Under NLP,
the government has launched the Unified Logistics Interface Platform (ULIP) to
provide all digital services related to the transportation sector into a single portal
creating a single-access point for all.

PROPOSED ALLOCATION IN THE 2023-24 BUDGET

India’s Capital Expenditure:
 India’s capital expenditure as a percentage of GDP increased from 1.7%
in 2014 to nearly 2.9% in 2022-23.
 For infrastructure, Rs 10 lakh crore (3.3% of GDP) was allocated in the
budget 2023-24, an increase of three times from 2019.
Largest Allocation:
 The Ministry of Railways received its highest-ever allocation of Rs 2.4
lakh crore, approximately nine times the allocation in 2013-14.
 The Ministry of Road Transport and Highways saw a 36% increase in its
budget to about Rs 2.7 lakh crore.
Extension of Interest-Free Loan to States:
 The direct capital investment by the Centre has been further
supplemented by a one-year extension of the 50-year interest-free loan to
state governments to encourage infrastructure investment and incentivise
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 complementary policy actions, with a significantly increased outlay of Rs
1.3 lakh crore.
 This will lead to decentralised infrastructure development in urban and
peri-urban areas across regions.
 Increasing allocations to PM Awas Yojana by 66% will not only provide
rural workers with housing, but also create jobs.

INDIA'S INFRASTRUCTURE PUSH CHALLENGING

Physical Infrastructure:
 Land acquisition: One of the biggest challenges in building physical
infrastructure is acquiring land, as it often involves resettlement of people
and compensation issues.
 Funding: Funding large-scale infrastructure projects is also a major
challenge, as the government may not have sufficient resources and
private investment may be limited due to economic and regulatory
hurdles.
 Lack of Technology: India faces challenges in terms of the availability of
technology and expertise necessary for complex infrastructure projects.
Social Infrastructure:
 Inadequate Human Resources: The shortage of skilled workers,
engineers, and managers can be a hindrance to the development of social
infrastructure projects.
 Lack of Public Support: Social infrastructure projects, such as healthcare
and education, require public support and buy-in, which can be difficult
to secure in a complex political environment.
 Inadequate Planning and Implementation: Poor planning and
implementation can result in substandard facilities and a lack of
sustainability, ultimately reducing the impact of the infrastructure push.
Digital Infrastructure:
 Digital Divide: There is a digital divide in India, with limited access to
technology and the internet in rural areas, which can hinder the
development of digital infrastructure.
 Cybersecurity Concerns: The increasing use of technology also raises
concerns about cybersecurity and privacy, making it necessary to have
strong regulations and infrastructure in place.

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  Lack of standardization: The lack of standardization and coordination
among different players in the digital infrastructure sector can create
problems for users and limit the potential for growth and innovation.

INITIATIVES TAKEN
Digital Infrastructure:
 JAM trinity — Jan Dhan, Aadhaar and mobile linkages
 Digital India programme
 Development, application, and large-scale expansion of cutting-edge
technologies such as 5G, Internet of Things (IoT), Artificial Intelligence
(AI), quantum computing, mechatronics, robotics and more.
 An important domain that the government is focusing on currently is
creating open AI resources. For example, Digital India Bhashini portal is
India’s Artificial Intelligence (AI) led language translation platform. The
Agriculture Accelerator Fund announced in the budget will enable the
Indian agricultural ecosystem (startups, businesses, and farmers) to work
collaboratively and find knowledge-based and farmer-centric solutions.
Social Infrastructure
 In the Union Budget 2023-24, the government has announced a mission
to eliminate Sickle cell Anaemia by 2047.
 PM Poshan Shakti Nirman or PM Poshan: It is the largest school feeding
programme of its kind in the world, covering students enrolled in
government schools from Classes 1 to 8.
 Beti Bachao Beti Padhao: It was launched in 2015 with the aim to address
sex selective abortion and the declining child sex ratio which was at 918
girls for every 1,000 boys in 2011.
Physical Infrastructure
 PM Gati Shakti Scheme: It aims to ensure integrated planning and
implementation of infrastructure projects in the next four years, with
focus on expediting works on the ground, saving costs and creating jobs.
 Bharatmala scheme: In 2022, India saw a major push in construction of
highways with more than 5000 kms of National Highways constructed.
Targeted development of highways under the Bharatmala scheme has
helped in bridging of infrastructure gaps in development of economic
corridors
WAY FORWARD
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Investment in social infrastructure:
 Investment in social infrastructure can lead to a more productive and
proficient workforce, reduced mortality, wasting and stunting, increased
social mobility and a higher quality of life.
 Social infrastructure includes education and skilling, public health and
nutrition, drinking water and sanitation.
 These factors contribute to a stronger and more inclusive economy and
holistic development
Increased Public-Private Partnerships (PPPs): The government can partner
with the private sector to finance, design, construct, and operate infrastructure
projects.
Improved Project Planning and Implementation: The government can
streamline project planning and implementation processes to ensure that
projects are completed on time and within budget.
Implementation of Innovative Financing Solutions: The government can
explore innovative financing solutions, such as infrastructure bonds, to mobilize
additional funds for infrastructure development.
Encouraging Foreign Direct Investment (FDI): The government can ease
regulations and create a favorable environment for foreign direct investment in
infrastructure development.
Building Human Capital: The government can focus on building human
capital in the form of skilled labour and technical expertise to support
infrastructure development.
 Investing in workforce development programs that provide job training,
apprenticeships.
 Providing access to quality education and training programs
 Supporting research and innovation in infrastructure-related fields
 Fostering partnerships between the public and private sectors to
encourage investment in human capital development
 Schemes to build human capital and support infrastructure development
include: Skill India, National Skill Development Corporation (NSDC),
Pradhan Mantri Kaushal Vikas Yojana (PMKVY).
Effective Regulation: The government can establish and enforce effective
regulations to ensure the quality and safety of infrastructure projects. Some
ways regulations can help:
 Regulations can set standards for the quality of materials, workmanship
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  Regulations can also specify safety requirements, such as fire safety,
evacuation plans, and accessibility standards, which must be met to
ensure the safety of the public and the workers involved in the project.
 Independent inspection and testing which will help to identify any issues
or problems that need to be addressed before the infrastructure is put into
use.

ECONOMIC IMPLICATIONS AND THE FUTURE

Transport infrastructure development reduces transport costs, increases gains
from trade, and drives up wages, thus boosting economic activity. The
development of infrastructure has helped move workers from agriculture to
more productive jobs. Making this transition possible and feasible, also inspired
improvements in educational attainment in villages. India will be integrated into
a high-quality transport network, powered by greenfield expressways,
electrified railways, revamped airports, and an EV ecosystem. The
transformative power of new infrastructure is a precondition for the high growth
that India aspires to achieve. It is a rising tide that will lift all the sections of
India. According to a recent report by American Investment Bank Morgan
Stanley, India has transformed itself in less than a decade due to key policy
choices like supply-side reforms, formalization of the economy, real estate
regulation, digitizing social transfers, insolvency and bankruptcy reforms,
flexible inflation targeting, focus on FDI, reforms in equity markets and
government support for corporate profits among other measures. The report
suggests that in the coming decade, there is going to be a steady increase in
many macroeconomic indicators of the Indian economy. India’s manufacturing
capacity is expected to reach USD 1500 billion by 2032 as compared to USD
447 Billion in 2022; export market share to more than double to 4.5% by 2031
as compared to 2.2% in 2021; and India’s per capita income is expected to more
than double from USD 2,200 currently to about USD 5,200 by 2032. The report
concludes that India will emerge as a key driver of global growth with New
India driving a fifth of the global growth through the end of the decade.

CONCLUSION
Provision of quality and efficient infrastructure services is essential to realize
the full potential of the emerging Indian economy. Indian government’s first
priority is therefore rising to the challenge of maintaining and managing high
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growth through investment in infrastructure sector, among others. Therefore,
there is substantial infrastructure needs in infrastructure sector in India, which,
in other words, also offers large investment opportunities. Public-Private–
Partnership (PPP) is emerging as the preferred instrument, where the private
sector gets its normal financial rates of return while the public sector partner
provides concessional funding based on the long-term direct and indirect
benefits to the economy. New instruments such as Viability Gap Funding (VGF)
through a special purpose vehicle (SPV) set up recently by the Government of
India to fund mega infrastructure projects may be relevant for other Asian
countries as well.
The cross-border infrastructure component is an important determinant of
regional integration. If countries are not inter-linked each other through
improved transportation network, regional integration process will not move
ahead at a desired pace. In India, development of cross-border infrastructure,
especially transportation linkages and energy pipelines with neighbouring
countries is underway and expected to contribute to the regional integration in
Asia by reducing transportation costs and facilitating intra-regional trade and
services. Nevertheless, there are many challenges. It is important for India to
enhance its overland connectivity with East Asia in order to effectively facilitate
the Asian regional integration.

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