Physical & Digital Infrastructure : Lifting Potential Growth

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• Infrastructure refers to those basic facilities which facilitate socio - economic development and
lend a helping hand to the production activities in the economy.

Classification of Physical Infrastructure

Economic Infrastructure Social Infrastructure

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• Features of Infrastructure
• Physical infrastructure services have an element in Public good in them
• Kicks in Multiplier effect
• Pushes Crowding in effect
• Infrastructure possess Positive Externalities

• Contribution of Infrastructure to Economic Development

o Leads to employment generation & poverty reduction
o Promotes rural & agricultural development
o Increases productivity & efficiency

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 Infrastructure Financing
1. Public Private Partnerships
• PPP’s are vital instruments for governments in channelling the strength of private
sector in critical areas of infrastructure.
• Helps to address infrastructure gap and improves efficiency.
• Private participation supports several PPP models

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 • Public Private Partnership Appraisal Committee (PPPAC) is the apex body for appraisal of PPP
projects
• ‘India Infrastructure Project Development Fund Scheme’ (IIPDF) – for project development
expenses ( Planning , Consultancy etc.,) of PPP Projects. Shells out 5 crore per proposal.

2. Viability Gap Funding

• Designed to provide capital support to socially/economically desirable PPP projects which would
not otherwise be financially viable.
• Launched in 2006.
• Economic sector projects may get up to 40 % of Capex as VGF grant.
• Social sectors may get up to 80 % of the Capex and up to 50 % of the Operating Expenditure
(Opex) as VGF grant.
• Social sector projects get VGF under two categories: Sub Scheme – 1 & Sub Scheme – 2

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 Details of Sub Scheme – 1 & Sub Scheme - 2

Sub Scheme - 1 Sub Scheme - 2

Share of Capex – Centre 30% 40%

Share of Capex – State 30% 40%

Share of Capex – Pv’t Sector 40% 20%

Total 100% 100%

Operational Cost recovery 100% 50%

Sub Scheme 2 : Operating Expenditure – 25:25:50 (C:S:Pv’t)

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Policies For Infrastructure
• National Infrastructure Pipeline
• National Monetisation Pipeline – Creation through Monetisation
• National Logistics Policy – Reducing the cost of Logistics
• PM GatiShakti : A master plan for integrated project planning

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National Infrastructure Pipeline (NIP)
• Group of various infrastructure projects to be executed over 5 years. i.e. from
2020 to 2025.
• With an aim to achieve GDP of US$ 5 trillion by 2025
• Investment – 111 lakh crore for 9000 projects with highest Capex expenditure in
energy sector.
• NIP is hosted in ‘Invest India Grid’ (IIG)
• ‘Invest India Grid’ (IIG) acts as a centralized portal to track and review project
progress. An initiative of the Department for Promotion of Industry and Internal
Trade (DPIIT), Ministry of Commerce & Industry
• Project Monitoring Group (PMG) is an institutional mechanism put in place by
the government for resolution of issues related to large-scale projects.
• PMG is also involved in the fast-tracking of approvals/clearances for projects
with an anticipated investment of ₹500 crore and above
• Proposal to integrate IIG & PMG

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National Monetisation Pipeline (NMP)
• Based on the principle of ‘asset creation through monetization’.
• It taps pv’t sector investment for new infra creation
• Gov’t leases out its public assets to pv’t sector for operation and maintenance of the
assets.
• Funds so received from Brown Field projects are reinvested in Green Field Projects.
• Estimated aggregate monetization potential under NMP is ₹6.0 lakh crore.

PM GatiShakti
• It’s a master plan for integrated project planning
• Plan entails creation of a common umbrella platform with all infrastructure projects
pertaining to various ministries/ departments
• It aims at increasing coordination & reduce wastage of funds
• Projects pertaining to seven growth engines (roads, railways, airports, ports, mass
transport, waterways, and logistic infrastructure) in the NIP will be aligned with PM
GatiShakti framework

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National Logistics Policy
• Logistics refers to the overall process of managing how resources are acquired, stored, and
transported to their final destination.

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• It includes all activities of the supply chain such as transportation, warehousing,
packaging, inventory management, the flow of information, order processing and
customer service.

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 Government of India’s 2017 Definition of Logistics
Min Investment Min Area

Multimodal Logistics Park 50 Crore 10 acres

Cold Chain 15 Crore 20000 sq. ft
Warehouse 25 Crore 1 Lakh sq. ft

Multimodal Logistics Park

Cold Chain Warehouse

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• Logistics Sector is expected to grow at 15.5%
• 2 to 3 crore jobs are to be created
• Logistics cost lies around 14 – 18 % of GDP, against global benchmark of 8%
• NLP aims to bring down the cost to 8% of GDP by 2030

• There exists a skewed transportation model in India with roadways taking up all the load

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 Skewed Transportation Model
TYPE INDIA GLOBAL
Road 60 % 25 %
Rail 35 % 60 %
Waterways 5% 15 %

• Railways & Waterways are underutilized

Logistics Performance Index (LPI)

YEAR RANK
2014 54
2016 35
2018 44
2022 Not available
2030 Top 25 – Target
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• The target of Lowering the Logistics Cost to 8% of GDP by 2030 & the endeavour to be among
top 25, in terms of LPI rank by 2030 is to be achieved via Comprehensive Logistics Action Plan
(CLAP)

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Logistics Ease Across Different States (LEADS)
• Based on World Bank’s Logistics Performance Index (LPI) methodology
• Released by Ministry of Commerce – Dep’t for promotion of Industries & Internal Trade
• Ranking is based on three characteristics
1. Infrastructure
2. Services
3. Operating & Regulatory Environment
• For ranking states are divided into
1. Coastal states
2. Hinterland / Landlocked states
3. North Eastern States
4. UT’s

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Scores > 90% Scores 80 – 90% Scores < 80%

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Developments in Physical Infrastructure Sectors
A. Road Transport

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 • Budgetary support for investment has been increasing rapidly in the last four years.
• Budgetary support stood at 1.4 lakh crore during FY 23.
• NHAI launched its InvIT in FY22 to attract foreign and domestic institutional investors to
invest in the road sector.
• InvIT raised more than 10200 crores up to Dec 2022
B. Railways

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 • Capex has been increasing rapidly since 2014.
• Capex has seen a continuous increase in the last four years with Capex of ₹2.5 lakh crore in
FY23, up by around 29 % compared to the previous year.
Major Initiatives of Railways
Dedicated Freight Corridor
• Eastern and Western DFCs
along the golden
quadrilateral
• 97,957 Crore invested in
DFC until 2023.
• Roads + Township
Development around DFC’s

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GatiShakti Multi-Modal Cargo Terminal (GCT)
• Eastern and Western DFCs
along the golden
quadrilateral
• 97,957 Crore invested in
DFC until 2023.
• Roads + Township
Development around DFC’s

Vande Bharat Trains

• Built in Chennai
• Max speed of 160 kmph
• Kavach – Anti Collision system

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Development of Hyperloop technology
• Emerging Tech – Potential to be
faster & greener than Airplanes &
railways
• Technology is still in development
phase
• Collaboration of Indian Railways &
IIT Madras at the cost of 8.34 crore

Kisan Rail Trains

• Introduced in FY21 to enable speedy
movement of perishables from
surplus regions to deficient regions
• Indian Railways have operated 2,359
Kisan Rail services

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C. Civil Aviation

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• Civil aviation sector in India has great potential owing to growing demand from
o Growing Middle class
o Growth in population and tourism
o Higher disposable incomes
o Favorable demographics
o Greater penetration of aviation infrastructure
• UDAN/Regional Connectivity System - Has considerably enhanced regional connectivity
through the opening of airports in India’s hinterland.
• Scheme focuses on the connectivity between the Tier-2 and 3 cities in the country.
• More than one crore air passengers have availed themselves of the benefit of the UDAN
scheme since its inception.
• Government has approved a budget of ₹4500 crore for revival of existing unserved/
underserved airports/airstrips

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D. Ports
• Most of the international trade is handled through ports (around 90 % of international trade
cargo by volume and 79.9 % by value)
• Capacity of major ports, has increased from 871.5 Million Tonnes Per Annum (MTPA) (March
2014), to 1534.9 MTPA (March 2022)

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E. Inland Water Transport
• Total navigable length of waterways in India is around 14,850 kilometers.

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• Under the National Waterways Act 2016, 111 waterways have been declared as National
Waterways (NWs)
• Inland Vessels Bill 2021
o Inland Vessels Bill 2021, replaced the over 100-year-old Inland Vessels Act, 1917.
o State governments may declare by notification any inland water area as a “Zone”.
o Any mechanically propelled vessel would have to obtain a certificate for operation.
o Standards for prevention of environmental pollution have been set

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F. Electricity - Installed capacity growth driven by renewables

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▪ Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) aims to
• Provide energy and water security
• De-dieselise the farm sector
• Generate additional income for farmers by producing solar power.
▪ Indian Railways has announced its intention to achieve net zero carbon emission by 2030

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Developments in Digital Infrastructure
• Focus areas of Digital India programme
o Availability of high-speed internet for delivery of services to citizens
o Unique digital identity
o Enabling citizen participation in digital and financial space
o Shareable private space on a public cloud (can digitally store their documents,
certificates, etc. and share them with public agencies without the need to physically
submit them)
o Safe and secure cyber-space
Telecommunications
• As of November 2022, telephone subscriber base in India stands at 117 crore.
• More than 97 % of the total subscribers are connected wirelessly.
• 83.7 crore have internet connections as of June 2022.
• The overall tele-density in India stood at 84.8 %. It ranged from 55.4 % in Bihar to
270.6 %in Delhi.

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Bridging Rural – Urban Digital Divide

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Growth Story of Digital Public Infrastructure (DPI)
• DPI is a system that allows to provide essential society wide function (Payment, Data,
Health, Identification) in digital space
• Aadhar (2009) commenced the journey of DPI

Evolution of DPI
Door step
Verifying Knowledge of Reducing Delivery of
Beneficiary Schemes Search Cost Services to
Citizens
Aadhar My Schemes UMANG portal
Open Network for Digital Commerce (ONDC)
• ONDC is a network-based open protocol
that would connect all the buyers and
sellers on the network.
• Buyer and seller can use the same
platform or application for transactions.
• Consumers can potentially discover any
seller, product, or service.
• Open network system will make the e-
Commerce landscape more inclusive,
accessible, and experience-driven for all
consumers and sellers, especially for
small businesses.

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Unified Payments Interface ( UPI )
• Empowers and knits multiple
bank accounts into a single
mobile application (of any
participating bank), merging
several banking features
• UPI transactions grew in value
121% & volume 115 %
between 2019-2022, paving
the way for International
adoption

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Initiatives taken in the field of Digital
Infra
 Conclusion

• Both physical and digital infrastructure have improved overtime due to

government initiatives
• Public Private Partnerships (PPPs), National Infrastructure Pipeline (NIP)
are some of the important initiatives for physical infrastructure
• Internet connection and Tele density has improved
 Prelims – Questions for practice
1. With reference to Invest India Grid, consider the following statements:
1. It is an online platform to facilitate funding by NRI in India infrastructure projects.
2. It is hosted by NITI Aayog.
Which of the above statements is/are correct?
a. 1 only b. 2 only c. Both 1 and 2 d. Neither 1 nor 2

2. With reference to Logistics Ease Across Different States (LEADS) Index consider the
following statements
1. It is based on the methodology under the Logistics Performance Index
2. It is released by the World Bank
Which of the above statements is/are correct?
a. 1 only b. 2 only c. Both 1 and 2 d. Neither 1 nor 2

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3. Projects pertaining to which of the following sectors in the national infrastructure pipeline
will be aligned with the GatiShakti framework?
1. Roads 2. Railways 3. Mass Transport 4. Waterways
5. Logistic infrastructure
Select the correct answer using the code given below.
a. 1 & 2 only b. 3, 4 & 5 only c. 5 only d. 1, 2, 3, 4 & 5

4. Arrange the following sources of energy in increasing order of their share in total energy
production in India
1. Thermal energy 2. Renewable energy 3. Hydro energy
Select the correct answer using the code given below,
a. 2-3-1 b. 1-2-3 c. 2-1-3 d. 1-3-2

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5. Consider the following statements:
1. India has the largest railway network in the world.
2. Only 20 percentage of international trade cargo by volume is handled through ports.
Which of the statements given above is/ are correct?
a. 1 only b. 2 only c. Both 1 & 2 d. Neither 1 Nor 2

6. With respect to Initiatives in Railways, Consider the statements

1. Indian Railways has announced its intention to achieve net zero carbon emission by 2030
2. Indian Railways has Collaborated with IIT Madras to develop Hyperloop Tech
3. Vande Bharat Express has Kavach – Anti Collision system, installed
Which of the above statements is/are correct?
a. 1 & 2 only b. 3 only c. 1, 2 & 3 d. 2 & 3

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7. With sector is projected to have the highest capital expenditure according to National
Infrastructure Pipeline Project
a. Roads b. Railways c. Energy Sector d. Urban Sector
8. With respect to Inland Vessels bill 2021 consider the following statements
1. Inland Vessels Bill 2021, replaced the over 50 -year-old Inland Vessels Act.
2. State governments may declare by notification any inland water area as a “Zone”.
3. Any mechanically propelled vessel would have to obtain a certificate for operation.
Which of the above statements is/are correct?
a. 1 & 2 only b. 3 only c. 1, 2 & 3 d. 2 & 3

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 Practice question for Answer Writing Skills
Q. Despite several efforts to improve the logistics sector in the Indian economy, it is not
devoid of challenges. In this context, discuss the role of the National Logistics Policy 2022
in addressing the gaps in the logistics sector in India.

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THANK YOU