M.

Arch (Masters in Architectural and construction project management)

SEMESTER-01

SUBJECT: Infrastructure development & Management

SUBJECT CODE: AR17MCP1.4C, credits:05

FACULTY:Dr.MS.Raghavendra

ASSIGNMENT:03

SUBMITTED BY: Ar. Mounika Sri Gedela

 1. Discuss the correlation between infrastructure development and poverty
reduction/economic growth. What do you understand by spillover effects in
infrastructure?

Ans:
correlation between infrastructure development and poverty reduction/economic
growth:
Introduction: Infrastructure is synonymous with economic development. Roads, railways,
and utility systems are needed in every economy, and the lack of infrastructure services
signal barriers to growth and underdevelopment. This chapter reviews the importance of
infrastructure in Asia’s economies, particularly noting its role in promoting inclusiveness and
reducing poverty.
Infrastructure development promotes inclusive growth and reduces poverty by creating
additional jobs and economic activities; reducing production and transport costs through
improved transport and connectivity; expanding overall production capacity; connecting
markets and other economic facilities that may extend beyond the country; and improving
access to key facilities such as health, education, and other basic services.
Role of infrastructure in improving the quality of life, especially for the poor.
Analytical framework depicting the links between Infrastructure and Poverty reduction
i.Creating Jobs and Economic Activities:

Expenditure on infrastructure can itself stimulate economic activity, but the

improvement in economic opportunity further creates employment. Infrastructure
investments stimulate the economy by creating jobs in the construction and
manufacturing sectors and generate considerable spinoff activity in the rest of the
economy.

ii.Reducing Production Cost: Infrastructure can improve connectivity, lowering

transport costs and reducing spoilage.

iii.Expanding Production Capacity: Infrastructure investment expands the production

possibility frontier, increasing the overall production capacity of the economy.
Energy infrastructure in particular provides critical inputs to modern production
processes

Example explaining the Indian scenario: In India, the use of electric pumps in
well irrigation was promoted in place of diesel pumps. This led to increased
agricultural productivity through greater land use, decreased reliance on rainfall,
and the adoption of higher-yielding crops. Improving access to electricity has
created a multiplier effect by Increasing hours and rate of commercial activities so
that working hours increased from 9 to 14 hours per day; turnover increased by 34%.
The electrified businesses employ more workers and pay higher wages than
non-electrified businesses

iv.Connecting Markets and Economic Activities: Improvements in transport and

communication enhance market efficiency by better connecting markets and other
economic facilities. Telecommunications infrastructure also provides the tools and
information necessary for markets to work better.

Example; A new railway link between two districts lowers their bilateral trade
cost, allowing consumers to buy goods from the cheapest district, and producers to
sell more of what they are best at producing.

v.Improving access to key facilities: Infrastructure development promotes poverty

reduction in its multidimensional ways as poverty reduction involves more than
narrow economic growth and includes noneconomic aspects, such as improved
access to roads, schools, health and other key facilities.

Investments of the Rural Infrastructure Development Fund led to improvement in

access to modern agro economic practices, improved accessibility to inputs, and
reduced transport costs. There is also a positive change in intangible benefits such as
changes in asset holding patterns, increased job availability, increased credit
absorption, improvement in access to education and health, and improved quality
of life. Improved connectivity due to the construction of bridges reduced costs of
transporting farm inputs and outputs, vehicle operating cost, travel time, etc so that
commercialization and diversification of crops, nonfarm activities, access to
education and health services have improved.

Analytical framework Analyze infrastructure for inclusive Growth & poverty reduction:

spillover effects in infrastructure:

Infrastructure also generates externalities, i.e., costs or benefits that fall on people
who are not directly involved in the economic activity or transaction. The pollution
generated by transport infrastructure systems is an example of a negative
externality.Conversely, new transport systems can have powerful positive spillover
impacts (positive externalities) on local economies by stimulating additional economic
activity beyond that immediately seen on the new road or railway.4 Moreover, water
and sanitation systems can also have very large and positive spillovers on general
public health.
Example explaining about spillover effect in transport infrastructure
Spillover effects of infrastructure can also be negative, as found in the literature. An
increase in infrastructure in neighboring countries may negatively affect the own
region’s economy. While intra-regional effects of infrastructure are generally positive,
the negative inter-regional spillover effects can be explained by a competing
economic relationship between the own and neighboring regions in acquiring
resources for production (while a positive inter-regional spillover means a
complementary relationship) or the regions may be competing for markets for the
products that they produce.

The studies at the subnational level find that infrastructure investment in one region
may draw mobile production factors away from other regions (for examples on the US,
see Boarnet, 1998; Cohen and Manaco, 2007 and Sloboda and Yao, 2008). Regional
competition takes various forms depending on horizontal/vertical competitive
relations and the type of competition and competitors (Batey and Friedrich, 2000). In
the case of cross-country spillover effects, one can expect smaller degrees of
negative (or positive) externalities, if any, given the higher restrictions imposed on
factor movements across countries.