How Investment in Infrastructure Push GDP

Infrastructure sector is crucial for India’s economic growth; primary reasons being-
  • #Roads- #highways, #railways, #airports, #metro, #ports potentially increase productivity and enables seamless functioning of other business sectors in an economy. They improve connectivity, supply chain which also means an ease in mobilisation of skilled manpower.
  • Since Investment is the dynamic element of the Gross Domestic Product (GDP), it gives government a way to spend on productive assets and thereby increases spending power of people and give further push to business in economy who invest in their business to meet increase in demand. This creates an economic cycle where businesses start looking at meeting higher demands in economy. This multiplier effect of investment is 3-4 times. According to Economic Survey 2022, India needs to invest $ 1.4 trillion by 2024-25 to achieve $ 5 trillion GDP.

Keeping this objective in view, National #Infrastructure Pipeline (NIP) was launched with projected infrastructure investment of around $ 1.50 trillion during five year plan of 2020-25. Economic Survey 2022 categorically stated that “The Higher Capital Expenditure with a focus on infrastructure spending in 2021-22 budget estimate will have a multiplier effect on the ongoing economic recovery.’

With a whopping worth of over USD 2.7 trillion, India is the sixth-largest economy by market exchange rates in the world. The country has a labor force of 522 million workers and counted as one of the world’s fastest growing economies 

Challenges that we foresee in the path of INFRASTRUCTURE GROWTH-

Political Stability: – Political stability at center and state level is a must requirement to achieve NIP’s target for infrastructure #building effectively and in a financially prudent manner.

Timely Approvals:  Timely Approvals from various department (Like #Environmental, #Forest, etc.) to start project and complete within timeline is also a must have requirement.

COVID– The last two years have been difficult for the world economy on account of the COVID-19 pandemic. Repeated waves of infection, supply-chain disruptions and, more recently, inflation have created particularly challenging times for policy-making. Faced with these challenges, the Government of India’s immediate response was a bouquet of safety-nets to cushion the impact on vulnerable sections of society and the business sector. It next pushed through a significant increase in capital expenditure on infrastructure to build back medium-term demand as well as aggressively implemented supply-side measures to prepare the economy for a sustained long-term expansion.

War Effect- India’s growth forecast for the next fiscal might get slashed, considering sharply higher energy prices on account of the #Russia-#Ukraine #war. The war in Ukraine and economic sanctions on Russia have put global energy supplies at risk. Russia supplies around 10% of the world’s energy, including 17% of its natural gas and 12% of oil. The jump in oil and gas prices will add to industry costs and reduce consumers’ real incomes.

Regardless of challenges & the road blockers; India's economy is expected to expand….

With our years of experience in providing tailor-made #solutions within the infrastructure #sector, we at Shri Sai Eco Solutions (SSES) has a keen interest and capability to understand our clients’ infrastructure problems and can also tailor solutions to meet specific requirements. Regardless of the size of a client’s infrastructure project, SSES can help.

Advance estimates suggest that the Indian economy is expected to witness real GDP expansion of 9.2% in 2021-22 after contracting in 2020-21. Agriculture and allied sectors have been the least impacted by the pandemic and the sector is expected to grow by 3.9% in 2021-22 after growing 3.6% in the previous year. Advance estimates suggest that the GVA of Industry (including mining and construction) will rise by 11.8% in 2021-22 after contracting by 7% in 2020- 21. The Services sector has been the hardest hit by the pandemic, especially segments that involve human contact. This sector is estimated to grow by 8.2% this financial year following last year’s 8.4% contraction. Total Consumption is estimated to have grown by 7.0% in 2021-22 with significant contributions from government spending.

It is said that weak infrastructure levies a massive cost on business, estimated at 3-4% annually. In other words, an infrastructure push directly lifts GDP growth by around 3-4% majorly because infrastructure investment has a multiplier effect.

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