Infrastructure is crucial to the development of any economy. Roads, railways, airways, and waterways enable connectivity with the outside world, facilitate trade and bring prosperity to the region. Advanced modes of transportation allow faster movement of goods and services. Improved connectivity helps in marketing as well as transporting products from the place of production to the market. Advanced infrastructure facilities have also enabled the creation of complex global supply chains. In economics terminology, infrastructure has a high multiplier effect. The Reserve Bank of India (RBI) and the National Institute of Public Finance and Policy estimate the multiplier to be between 2.5 and 3.5. This means that for every rupee spent by the government on infrastructure projects, GDP will increase by Rs. 2.5 to Rs. 3.5. In addition, such a high multiplier suggests that spending by the government on infrastructure leads to crowding in private investment.

Given the key role played by infrastructure, the government must have a planned and coordinated approach. However, due to the multiplicity of departments and the lack of communication and coordination among them, decision-making was fragmented. For instance, after the construction of a road, government agencies tend to dig up the road again to lay ground cables, gas pipelines, and so on; this not only leads to unnecessary wastage of resources and increased costs but also causes a nuisance to citizens and pollution. Such a scenario could be avoided through coordination among the involved agencies and by issuing all approvals simultaneously before the construction of the road. The lack of proper planning and execution has hampered India’s economic growth.

To solve this problem, Prime Minister, Shri Narendra Modi instituted PM Gati Shakti – National Master Plan for Multi-modal Connectivity. The plan includes a digital platform under which 16 ministries will be brought together for integrated planning, coordination, and implementation of all the infrastructure projects. The increased connectivity resulting from this scheme will allow faster movement of goods, services, and people using multiple modes of transport which would help save time and cost. This will also allow remote areas to be connected with the rest of India and the world, thereby driving prosperity in these areas. Subsequently, trading activity will increase while inefficiencies and costs will decrease. multiple infrastructure schemes launched by ministries and State Governments such as Sagarmala, Bharatmala, ports, UDAN, inland waterways, etc. will be incorporated into PM Gati Shakti. Also, economic zones such as textile clusters, defence corridors, pharmaceutical clusters, agri-zones, fishing clusters, industrial corridors, and economic corridors will be covered. This will make Indian businesses more competitive and the economy more efficient as well as help in the growth of India’s economy.

Indian Infrastructure Industry

As the infrastructure sector is a key driver of India’s economic development, the government is implementing policies and projects for infrastructural development. Recently, the government plans to invest Rs. 1,00,000 crore (US$ 13.1 billion) in infrastructure projects by 2024-25. The five-year National Infrastructure Plan (NIP) has entered its second year in FY 21, and Rs. 19.5 lakh crore (US$ 2.6 billion). Road transport, urban infrastructure, railways, and energy accounted for approximately 70% of allocation in 2020. The government's commitment to infrastructure is evident from these initiatives. Moreover, this has made the infrastructure sector a lucrative investment option. As per the Department for Promotion of Industry and Internal Trade (DPIIT), 13% of the total FDI inflow in FY 21 was allocated to infrastructure activities. Mordor Intelligence, a market research firm, expects India's infrastructure industry to grow at a compounded growth rate of 7% between 2021 and 2025. Furthermore, India is expected to become the third-largest construction market in the world by 2022.