Effect of Infrastructural Facilities on Stabilization Policy

Introduction

The social and economic development of the society is inseparable from the political, cultural and legal environment in the country. It occupies an important place in society, and the development of the society is not the development of only one aspect of the economy, but it requires a whole lot of development in each and every aspect, whether infrastructure, income distribution, industrialization, etc. Thus, the ultimate goal of development is to enhance the quality of life of all people living in society by providing good infrastructure facilities, removing regional inequalities, and a fair and proper distribution of income and wealth.

If all these facilities are given to people living in the society, the economy will grow at a faster pace, and a country like India will come under the cadre of a developed economy. Thus, giving timely facilities to the citizens requires proper fund management by the government. Proper fund management is possible only through proper monetary and fiscal policies for the country.

If the government has sufficient funds for development, then it will raise the standard of living of the people living in the society. Thus, a proper formulation of stabilization policies by the government is very necessary because the whole development of the economy rests on stabilization policy because, through these policies, the government generates more and more funds which are being spent on the welfare of the society.

1. Effect of Infrastructural Facilities on Stabilization Policy
2. Effect of Distributional Inequality on Stabilization Policy
3. Effect of Regional Imbalances on Stabilization Policy

Effect of Infrastructural Facilities on Stabilization Policy

The development of a country’s infrastructure is vital for the growth in all sectors of the economy. Infrastructure refers to systems and facilities given to the people living in a country, area or city and these facilities are necessary for the economy to function in a proper manner.

According to Keynes the word infrastructure was exclusively used to describe public assets that facilitate production, but not private assets of the same purpose. Thus, a sound infrastructure serves as the foundation and the key to the socio-economic development of the economy.

A good infrastructure base in the country can quicken the development of the economy at a faster rate and a weak infrastructure can hamper the development of the economy. When infrastructure facilities are adequate in the country, then it also acts as a magnet for attracting additional investment in the country. Thus availability of adequate infrastructure promotes industrialization in the economy and also improves the quality of life of the people living in the state.

Infrastructure includes railways, roadways, ports, power, aviation and telecommunication etc. All these services in the country ensure the progress and growth of the whole nation. Therefore, infrastructure is considered as an important driver in the development of economic and social prosperity in the economy. Strong infrastructure facilities form the backbone of a nation’s economy. A sound infrastructure is also considered as the lifeline of the economy of the country.

The World Development Report 2000 says that “The adequacy of infrastructure helps in determining one country’s success with the another and also help in diversifying production, coping with population, reducing poverty and improve environmental conditions’’.

Therefore, good infrastructure in the country raises productivity and lowers the production cost which helps in increasing the standard of living of the people in the country. The government spends a lot of money on infrastructure facilities and also launches various schemes for improving infrastructure facilities in the country. Recent schemes which were launched by government of India for enhancing the infrastructure base in the country were:

(a) Heritage City Development and Augmentation Yojana:

National Heritage City Development and Augmentation Yojana (HRIDAY) was launched by the government of India on 21 January 2015. This scheme shall support the development of heritage infrastructure projects which includes repairing of Ghats, monuments and temples. These types of initiatives will include development of parks, road, public transport parking and sanitation facilities. This scheme requires a total outlay of 500 crores.

(b) Smart City Programme:

The government of India launched this programme in 2015 to promote healthier, wealthier and happier cities for a better life. The government has decided to develop 100 cities, and it also covers remodelling of existing cities.

(c) Swachh Bharat Mission:

This Abhiyan is a national campaign which covers 4041 towns in the country. This abhiyan cleans the streets, roads and improves infrastructure facilities in the country. This scheme was launched on 2 October 2014 for preserving and maintains cleanliness in the society. This mission requires a total of 1200 crores.

(d) Sagar Mela Project:

This is an initiative taken by the government of India to modernize ports so that the development of ports on coastlines can contribute a lot to the growth and development of the Indian economy. This scheme will transform the existing ports into modern world class ports so that goods can be easily send to the consumers. This project requires an outlay of 650 crores.

(e) Pradhan Mantri Gram Sadak Yojana:

This programme will link all rural habitations with a population above 1000 by 2016, and one more programme launched under this scheme was the Pradhan Mantri Pradesh Sadak Yojana (PMPSY). This scheme will improve all the state highways and district roads in the country. This scheme will cover building world-class highways and linking roads with urban and rural areas.

(f) Make in India Scheme:

This scheme launched by the government in 2015 for enhancement of competitiveness in the Indian capital goods sector. This scheme will require an outlay of 930 crores, and it will boost the capital goods sector in India. This scheme will cover mainly the goods on machine tools, construction and mining machinery, textile machinery and process plant machinery. This scheme will create integrated industrial infrastructure facilities in the area of machine tools and will make the machine tool sector more competitive.

Therefore, it is truly said that infrastructure is the base on which the economic activity of the whole country depends. The government now and then is launching new and new schemes for development of infrastructure and spending thousands of crores of rupees every year to create infrastructure facilities for the benefit of the society and the whole round development of the economy. Therefore, the government uses to arrange crores of funds for infrastructure facilities from monetary and fiscal policies framed by the government.

The government used to levy various kinds of direct and indirect taxes on the consumers, and the government used to receive ample amounts of revenue from these taxes. The revenue received by the government is being spent on the development of the economy in the form of infrastructure facilities. The fiscal policies measures such as taxation generates revenue to the government. The revenue generated by the government from fiscal policy is being spend on various infrastructure projects and due to this all sectors get a boost.

Therefore, a sound stabilization policy is essential only the government can arrange funds for the welfare of the economy. If the stabilization policy is not effective, then the investment in infrastructure facilities will also come to a standstill.

Infrastructure in the country can be owned or managed by the government or by private companies. The government manages infrastructure through its tax and expenditure policy, and private companies manage infrastructure through various investments in capital markets and the arranging of loans from banks and financial institutions.

Thus, it can be clearly understood that if the stabilization policy is working properly, then the government will find it convenient to arrange funds for infrastructure facilities and also try to maintain economic stability in the country.

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