Public Infrastructure

Updated on April 15, 2024
Article byPranjal Jain
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Public Infrastructure?

Public infrastructure is defined as a country or state construction, facilities, systems, concrete, and other structures owned and maintained by the government, i.e., the Central Government, State Government, government company, or any other public undertaking or organization.

What Is Public Infrastructure

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Such facilities and services are available for the public with/ without applicable charges. It includes facilities like roads, water, electricity, telecom, etc. There is a need for reliable and safe physical structures 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.

Key Takeaways

  • Public infrastructure refers to the country or state construction, facilities, concrete, systems, and other structures government owns and maintains. It includes the Central Government, State Government, government company, or other public undertaking and organization.
  • These services and facilities are accessible with/without applicable charges for the public. It involves electricity, water, roads, and telecom.
  • Examples of public infrastructure are political infrastructure, transportation infrastructure, power, and energy infrastructure, telecommunication infrastructure, educational infrastructure, health infrastructure, water infrastructure, and recreational infrastructure.
  • Public infrastructure is crucial for faster and more comprehensive economic growth shared by the majority of the country. 

Public Infrastructure Explained

The terms public infrastructure means any structure in the physical form or organizational form that is essential for the development of the society and economy as a whole.  It leads to proper and smooth functioning of the system. These infrastructure facilities are operated, owned and managed by the public or government enterprises and help in supporting the general public to meet their needs.

All the infrastructureInfrastructureInfrastructure refers to fundamental physical and technological frameworks that a region or industry establishes for its economy to function properly.read more facilities for general public use, such as roads, telecommunication, railways, water supply, public parks, schools, and universities, can be commonly mentioned under a single term – “public infrastructure.” These essential systems and facilities aid in an economy’s continuous, seamless, and smooth flow. These key public infrastructure can be described as basic facilities that serve the country’s citizens and help in a thriving economy. It enhances the living standards of society by providing essential commoditiesCommoditiesA commodity refers to a good convertible into another product or service of more value through trade and commerce activities. It serves as an input or raw material for the manufacturing and production units.read more and services to sustain a good life. The level of such investment done by a country defines the development level of that economy. It plays a very important role in enabling. functioning of economic activities by using both tangible and intangible assets.

Activities and facilities of public infrastructure investment like transportation, basic public utility like water and electricity supply, telecommunication, energy, educational and healthcare infrastructure contribute to the development and wellbeing of the society.

Even safety and recreation services are very important so people can be assured of a safe and healthy living environment where they can also practice their cultural activities and access any recreational facility for all-round development.

This explains the fact that any form of public infrastructure is crucial for overall economic and infrastructural growth, to add positive value to the quality. of life and ensure smooth and healthy progress in society.  However, the process is not easy. It requires a lot of skilled and careful planning along with investment from the part of the government or organizations who take the responsibility of implementation and maintenance of the same.

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Examples

Public infrastructure investment is one of the pillars of the economy. The government should adequately plan its investment and utilization.

Public Infrastructure Example

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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, waterways, and all other mediums of transportation fall under transportation infrastructure.
  3. Power and Energy Infrastructure – Solar panels, wind turbines, power grids and stations, gas pipelines, and other sources of power and energy.
  4. Telecommunication Infrastructure – Wi-Fi 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, 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, natural parks, public gardens, historical sites, and beaches.

Investment

The government finances key public infrastructure investmentsInvestmentsInvestments are typically assets bought at present with the expectation of higher returns in the future. Its consumption is foregone now for benefits that investors can reap from it later.read more by employing distortionary funds collected from taxes, charges, cess, etc. The value of investments is measured based on policy process critical inputs, cost function, and aggregate productions. Investment in infrastructure is the tool of anti-recessionary fiscal policy Fiscal PolicyFiscal policy refers to government measures utilizing tax revenue and expenditure as a tool to attain economic objectives. read more. When the country’s economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society.read more struggles, public economists and politicians, emphasize greater infrastructure spending as it forms a stimulus for the economy’s growth. However, there is little practical evidence that proves investment is 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 assumes that when the economy is unproductive, it can revive it to its full capacity by using public expenditures. Specifically, for infrastructure, the government spends with the belief that involuntarily unemployed persons can be employed in public infrastructure jobs and receive income that aids in promoting growth.

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

Low real interest ratesReal Interest RatesReal interest rates are interest rates calculated after taking inflation into account. It is a means of obtaining inflation-adjusted returns on various deposits, loans, and advances, and thus reflect the real cost of funds to the borrower. read more generate a multiplier effect on the economy’s growth.

Importance

Let us look at some of the importance of the process of public infrastructure projects in detail.

Advantages

Let us look at some of the advantages of the system.

Disadvantages

However, some disadvantages of the system of public infrastructure companies are as follows.

  • It takes much more time to complete than those with private infrastructure.
  • The scope of innovation in public infrastructure projects is very low. That is because public projects do not develop ideas and designs but rather follow the old school process in implementing the project.
  • Chances of corruption are more in these projects. That is because the money allotted for the project may not be wholly used but rather gets channelized between various public departments involved in the project’s implementation.
  • Quality in public infrastructure investment gets compromised as the government’s primary aim is to provide the service irrespective of the institutions and infrastructure’s quality and standard.

Public Infrastructure Vs Private Infrastructure

Infrastructural development are a part and parcel of any society. However, both the above are two different models to manage the essential services. Let us compare the same and find the basic differences.

  • The former is owner, implemented and maintained by the government or any other public organization but the latter is owned and maintained by private entities.
  • In case of the former, the government itself is responsible for taking decisions regarding the planning, investment and arrangement for funds whereas in case of the latter, funding and investment is taken care of by the private entities.
  • For the public infrastructure investment, funds are arranges through government budgets, money collected through issue of government bonds to the general public, money collected form taxpayers and other government revenue sources. But in case of private investments, the funding comes from private investments.
  • The main purpose of the former is to serve the society and uplift the general condition of people living in the country though equal distribution of resource, whereas the main purpose of the latter is to enhance efficiency and promote ways and means to become profitable.
  • The accountability of the former lies with the government, who elect officials who oversee the implementation and maintenance of the same, whereas the latter is looked after and accountability lies with the private organizations and bodies who maintain them.

It is to be noted that there are many hybrid models that are being used in the society today which are a combination of private and public which has advantages as well as disadvantages. But depending on the resource availability and condition of the society, these models also work well if implemented in a structured and planned manner. ‘

Frequently Asked Questions (FAQs)

What is a public infrastructure district?

Public infrastructure district refers to the local district that works under the provisions of this chapter, Chapter 2a, Part 12, and the Public Infrastructure District Act.

What is the digital public infrastructure upsc?

Digital public infrastructure(DPI) means the solutions and systems that provide efficient provision of crucial society-wide functions and services in the private and public sectors. It involves ID and verification, digital transactions, money transfers, civil registration, information systems, and data exchange.

What are the public infrastructure issues in the Philippines?

The public infrastructure issues in the Philippines are difficult traffic situations, long traveling, under-capacity in international airports, and port blockage. The nation’s infrastructure problems are related to widespread rural-to-urban migration since many Filipinos migrate to big cities, especially Metro Manila, in search of employment. It leads to significant traffic jams that result in lengthy commute times and delays in the delivery of commodities.

What are the effects of public infrastructure investment?

Public infrastructure investment encourages private capital and labor productivity, leading to superior output. However, such a positive effect can counterbalance if the investments get financed with surplus government-borrowed funds.

Recommended Articles

This article is a guide to what is Public Infrastructure. We explain it with example, investments, differences with private infrastructure & importance. Also, you may learn more about financing from the following articles: –