Module - 1
Introduction to Infrastructure Economics
Brief Outline
Introduction: Economics
Meaning of Infrastructure
Infrastructure Economics
Infrastructure: Features
Types of Infrastructure
Indicators of Infrastructure Development
Introduction: Economics
Economics is a science which studies human behavior as a relationship between
ends and scarce means which have alternative uses (Robbins, 1932).
Economics is the study of how societies use scarce resources to produce
valuable commodities and distribute them among different people (Samuelson
and Nordhaus, 2007).
Economics is thus the ‘study of scarcity’ and analyzes the rational behavior-
the choices made in micro frame work in allocation of scarce resources to
alternative uses
Household are constrained by individual budgets and businesses by technology
and resources
Meaning of Infrastructure
Infrastructure is the system of public works in a country, state or region,
including roads, utility lines and public buildings (United Nations, 2000).
Infrastructure refers to the substructure or underlying foundation or network
used for providing goods and services; especially the basic installations and
facilities on which the continuance and growth of a community, state, etc
depend ( U.S. EPA, 2009).
Infrastructure is the basic facilities and services that are necessary for carrying
out the economic activities and which help in the economic development of the
country. These basic facilities do not produce goods and services but facilitate
the production and distribution processes.
Infrastructure Economics
Infrastructure economics attempts to study the infrastructure from
economics view point
The demand and supply of infrastructure in the economy
The mismatch between demand for infrastructure finance and supply of
investable funds: the infrastructure financing gap
The cost-benefit analysis of infrastructure projects
The returns on infrastructure investments
Infrastructure and economic growth
Models of infrastructure development
Types of Infrastructure: Broad Category
(a) Economic Infrastructure (b) Social Infrastructure
These are the basic amenities that do not directly
Economic infrastructure is the basic influence the economic activities, but indirectly have an
facilities which directly benefit the process impact on the economy through achieving certain social
of production and distribution in an objectives. For example, education does not directly
economy. Roads, railways, influence economic activities like production and
telecommunication systems, waterways, distribution but indirectly helps in the economic
airways, financial institutions, electricity, development of the country by spill-over effects. So
water supply etc are the examples of education, health services and sanitation etc. are the
economic infrastructure. examples of social infrastructure.
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Types of Infrastructure: Detailed Category
Category Name Examples
Category 1 Rural Infrastructure Irrigation, rural connectivity (roads, power, IT), cold
chains and mandis
Category 2 Urban Infrastructure Water, sanitation, sewerage, Telecomm, Internet
Category 3 Core Infrastructure Roads, railways, airports, sea ports, inland waterways,
energy
Category 4 Social Infrastructure Healthcare, education, housing, hospitality
Category 5 Land- Intensive SEZs, industrial parks, townships, IT parks
Economic Indicators of Infrastructure Development
Per Capita Electricity Consumption
Per Capita Energy Use (kg of oil equivalent)
Telephone Line Per 1000 Population
Rail Density Per 1000 Population
Air Transport, Freight Million Tons Per Kilometer
Paved Roads As Percentage of Total Roads
Social Indicators of Infrastructure Development
Number of Hospitals Bed Per 10000 Population
Number of Hospitals Per 1 Lakh Population
Number of Primary and Middle Schools Per 10000 Population
Number of High Schools Per 10000 Population
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