An equally demanding challenge to India's economic development is how to
provide adequate and reliable economic infrastructure services at reasonable cost and
with sustainable financing and pricing policies. It must be emphasized that unless there
are major improvements in this area, the momentum of growth in industry, agriculture
and exports can be lost. It is no exaggeration to say that the prospects for India's social
and economic development depend crucially on the performance of infrastructure sectors,
such as power, roads, railways, ports, irrigation and telecommunications.
Bringing about the necessary improvements will entail a paradigm shift from the
old public monopoly approach to one in which private providers of infrastructure
services are also actively encouraged. A significant start has already been made in
encouraging private providers in power, telecommunications, civil aviation, ports and
roads. However much remains to be done to develop and implement viable policy
frameworks and institutional structures. Independent regulatory authorities have to be
established to set appropriate rates, harmonize design standards and specifications and
generally promote the public interest. Transparent and workable rules and procedures for
private investment and operation have to be clearly set out in each infrastructure sector.
Since government-owned entities will continue to be important providers of services in
most infrastructure sectors, far-reaching reforms will have to be undertaken to increase
the operational efficiency and accountability of these entities and ensure application of
commercial principles in their operation and financial management, including tariff
policies. In many cases, major institutional reforms will also be necessary.
Cost-effective expansion of infrastructure sectors will require massive amounts of
long-term finance. This, in turn, will require reforms of insurance and provident fund
sectors and suitable policies for rapid and healthy development of markets for long-term
bonds. There is also enormous scope for attracting foreign direct investment in
infrastructure sectors.
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Published by The Government of India, Ministry of Finance,
Economic
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