Academic journal article IUP Journal of Applied Economics

Infrastructure, Growth and Poverty Nexus in India: A State-Level Analysis

Academic journal article IUP Journal of Applied Economics

Infrastructure, Growth and Poverty Nexus in India: A State-Level Analysis

Article excerpt

(ProQuest: ... denotes formulae omitted.)

Introduction

The provision of basic infrastructural services plays a significant role in rapid socioeconomic development. Abundance and efficiency in both physical and human capital generate structural changes at the bottom level, thereby maximizing the potential capacity of the factors of production and augmenting farm and non-farm productivity. So, all these factors directly and indirectly help to generate a substantial impact on production at the sectoral and regional levels too. According to GoI (1995-96, p. 134), adequate quantity, quality, and reliability of infrastructure are the key determinants of growth of overall economy and exports. It is often said that infrastructure can be considered, if not the engine, as the wheels of economic growth (World Bank, 1994, p. 14). In particular, physical infrastructure and public capital stock are positively and significantly related to growth in Gross Domestic Product (GDP) per capita and affect per capita personal income. Thus, infrastructure capacity grows along with economic output; a 1% increase in the stock of infrastructure is associated with a 1% increase in GDP across all countries. It is evident that a strong association exists between the availability of certain infrastructure and per capita GDP (Shah, 1970; Kevin and Randall, 1991; World Bank, 1994; and Sanchez-Robles, 1998). In addition, infrastructure plays a crucial role in alleviation of poverty, raising the living standard, providing environmental sustainability, and creating effective demand in the economy (World Bank, 1994; Wei et al, 2008; and Seetanah et al., 2009). Calderon and Serven (2004a and 2004b) suggest that infrastructure development should rank at the top of the poverty reduction agenda.

Hence, the access to both economic and social infrastructure facilitates growth and welfare. In particular, rural and agriculture infrastructure such as rural roads, electricity, telecommunication, irrigation, fertilizers, credit, markets, and so on, are the essential inputs for augmentation of productivity in agriculture and allied sectors along with improving the welfare of the rural commonalities. So, the stock of rural infrastructure and the flow of government investment in the development of agriculture and rural infrastructure are necessary for rural masses to come out of poverty and increase their income levels by increasing productivity of the agriculture sector as well as rural non-farm employment in both India and China (Datt and Ravallion, 1998; Fan et al., 2000; and Fan et al., 2002). Similarly, better connectivity and inclusiveness among sectors and regions can initiate market-based activities in the rural and hinterland areas. It leads to agriculture and allied products obtaining more reasonable prices, and thus allowing farmers to utilize their own marketable surplus further. For instance, access to road of the entire rural population would raise the average income by about 10% in Nepal. The benefits of rural roads are lower costs for transporting crops to market and obtaining modern inputs such as fertilizer (Jacoby, 2000, p. 734 and 735). Similarly, improved road and communication networks help people to find new employment sources and reduce premature deaths (Infant Mortality Rate, IMR and Maternal Mortality Rates, MMR) and a head count ratio of poverty in Indian states (Ghosh and De, 2004 and 2005, p. 4647 and 1031).

So, the provision of adequate and quality infrastructure in rural areas is necessary for increasing the productivity and efficiency of agriculture in the form of improving the credit-absorbing capacity, enhancing the productivity of crops and livestock, generating employment and increasing farmers' income, which in turn has a direct impact on minimizing the incidence of rural poverty. Further, there is significant scope for increasing the yield of foodgrains and agricultural income by improving the rural infrastructure. …

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