Public Infrastructure

Public Infrastructure Definition

Public Infrastructure can be defined as a country’s or state constructions, facilities, systems, concrete and other structures which are owned and maintained by government i.e. either by central government, state government, government company, any other public undertaking or organization whereby such facilities and services are available for use by public at large with/ without applicable charges and includes facilities like, roads, water, electricity, telecom etc.

Explanation

All the infrastructure facilities that are meant for the use of the general public, such as roads, telecommunication, railways, water supply, public parks, schools, and universities, can be commonly clubbed under a single term – “Public Infrastructure.” These essential systems and facilities aids in the continuous, seamless, and smooth flow of an economy. These can be described as fundamental facilities that are served to citizens of the country and also help in a thriving economy.  It enhances the living standards of society by providing essential commodities and services to sustain a good life. The level of such investment done by a country defines the development level of that economy.

Examples of Public Infrastructure

Public Infrastructure

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  1. Political Infrastructure –  All governmental institutions such as regulatory bodies, administrative units, law courts, and public security services such as defense, police force, etc.
  2. Transportation Infrastructure –  Roadways, railways.  Airways and waterways and all other mediums of transportation fall under transportation infrastructure.
  3. Power and Energy Infrastructure –  Solar panels, wind turbines, power grid and stations, gas pipelines, and all other sources of power and energy
  4. Telecommunication Infrastructure – Wifi services, broadband network, telephone network owned by government bodies.
  5. Educational Infrastructure –  Public academic and training institutions, public schools, libraries, and universities.
  6. Health Infrastructure – Government hospitals and subsidized health clinics, etc. are included in public health infrastructure.
  7. Water Infrastructure –  Drainage and sewage systems, water supply, water resource management, postal restoration, and flood management.
  8. Recreational Infrastructure –  Natural reserves such as national parks, botanical gardens, biological parks, public gardens, historical sites, and beaches.

Public Infrastructure Investment

Public infrastructure investments are financed by the government by employing distortionary funds collected from various sources like taxes, charges, cess, etc. The value of investments is measured on the basis of policy process critical inputs, cost function, and aggregate productions. Investment in infrastructure is the tool of anti recessionary fiscal policyFiscal PolicyFiscal policy is a government policy that is used to control a country's finances and revenue, and it includes various taxes on goods, services, and individuals, i.e., revenue collection. It has an impact on spending levels, so it is referred to as monetary policy's sister policy.read more. When the country’s economy struggles, public economists and politicians, emphasize greater infrastructure spending as it forms a stimulus for the growth of the economy. However, there is little practical evidence that proves investment as positive for the economy. Hence there is a disconnection between political rhetoric and economic reality. Government spending is based on the Keynesian economicsKeynesian EconomicsKeynesian Economics is a theory that relates the total spending with inflation and output in an economy. It suggests that increasing government expenditure and reducing taxes will result in increased market demand and pull up the economy out of depression.read more assumption that when the economy is unproductive, it can be revived back to its full capacity by using public expenditures. Specifically to infrastructure, the government spends with the belief that involuntarily unemployed persons can be employed to public infrastructure jobs and receives income, which aids in promoting growth.

Such investments demand high-cost investment projects, which also yields higher returns. Hence along with the government, some private companies also opt to invest in public infrastructure projects in order to expand their own business. Such investments are beneficial for both companies as well as the economy.

It generates a multiplier effect on the growth of the economy when real interest rates are low.

Importance

Public infrastructure is important for faster economic growth and inclusive growth that is shared by the majority of the country. It helps in the alleviation of poverty and reduction in income distribution inequalityIncome Distribution InequalityIncome Inequality is defined as an unequal distribution of income between the masses or a situation when a large proportion of total income is held by the small percentage of the population. It happens due to variation in sources of income, number of dependents, easier availability of resources, etc.read more. The expansion in its facilities such as roads and road transport, rural electrification, irrigation promotes agriculture growth and also helps in setting up of agro-processing industries, which in turn help farmers in fulfilling their requirement of fertilizers, raw materialsRaw MaterialsRaw materials inventory is the cost of products in the inventory of the company which has not been used for finished products and work in progress inventory. Raw material inventory is part of inventory cost which is reported under current assets on the balance sheet.read more, and various other inputs at a feasible rate. Roads help them bring their produce to the market on which huge profits can be earned. Essential social services like health care and education, when provided through it also helps in boosting the economy and reaching to the last person in the community helps in providing equal distribution of services. Adequate infrastructure facilities also help in expanding trade not only within the country but also promote foreign trade via improvement in ports and airports.

Advantages

  • Helps in ensuring required investment into the public sector and better management of public resources.
  • Public services provided through public infrastructure ensures a higher quality of services and timely provisions of these services for the public.
  • The cost of investment projects are predetermined and are implemented in due terms that help in eliminating unforeseen expenditures.
  • Private sector expertise is utilized in implementing infrastructure projects that help in delivering a high quality of infrastructure.
  • Initial investments in such projects are financed by the public sector and later recovered by the community as the project profit.
  • It helps in boosting the employment rate of the economy as it employees various unemployed persons for building infrastructure projects at sustainable wages.
  • It connects households across all the cities, towns of the country, ensuring a better quality of opportunities such as healthcare, education, employment, and broadband networks, etc.

Disadvantages

  • Time taken by it to complete is much more than those with private infrastructure.
  • The scope of innovation in public infrastructure projects is very low. Public projects do not come up with innovation in ideas and designs rather follow the old school process in implementing the project.
  • Chances of corruption are more in these projects as the money allotted for the project may not be wholly used for the project rather gets channelized in between various public departments that are involved in the implementation of the project.
  • Quality in public infrastructure gets compromised as the main aim of the government is just to provide the service irrespective of the quality and the standard being delivered by the institutions and infrastructure.

Conclusion

There is a need for reliable and safe physical structures that are essential for a thriving economy and an efficient society. Effectively enforced laws and safety codes to help in curtailing illegal practices like corruption and allow the infrastructure market to be more reliable and physically secured. Overall, public infrastructure investment is one of the pillars of the economy. The government should adequately plan its investment and utilization.

Recommended Articles

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