li    inan e in ndia        18.29
     the Mid Year Economic Analysis 2014–15, too.                         (except an increase during 2009–10 and
     The document says that reviving ‘targeted public                     2010–11).
     investment’ will work as an engine of growth                   (ii) The World Economic Outlook-2014
     in short-term and will lead to investment flows                      (an IMF report)68 noted that increases
     coming in from the private sector. It has not                        in public infrastructure investment,
     suggested public investment as a substitute for                      if efficiently implemented, affects the
     private investment but as a means to complement                      economy in two ways:
     and kick start investment flows from the latter.                     (a) In the short run it boosts
                                                                              aggregate demand and crowds in
     role of Public investment                                                (increases) private investment due
     Several recent studies, from India and abroad, have                      to the complementary nature of
     been quoted by the Economic Survey 2014–15 to                            infrastructure services.
     suggest an increase in the public investment—in                      (b) In the long run, a supply side effect
     a targeted way. Here, ‘targeted’ public investment                       also kicks in as the infrastructure built
     means, government investment in the sector                               feeds into the productive capacity of
     which can generate the largest ‘spillover effects’ to                    the economy (infrastructure being the
     the economy. In present time, the Railways has                           lifeline of an economy that bringing
     that level of spillover potential. The Survey agrres                     positive effects to all sectors).
     with the famous observation of W. W. Rostow
                                                                          The studies of the IMF confirm that
     – ‘the introduction of the railways has been
                                                                          increase in public investment can have
     historically the most powerful single initiator of
                                                                          positive effects on output. The medium-
     take-offs’67. The rational for such a policy action
                                                                          term public investment multiplier for
     has been emphasised by referring to the follwoing
                                                                          developing economies is estimated to
     documents and studies:
                                                                          be between 0.5 and 0.9, however, the
           (i) It has been found that there has been                      magnitudes depend on the efficiency of
                a ‘link’ between public and private                       implementation.
                investment in past which caused either
                                                                   (iii) In order of boosting public investment
                rise or fall in the growth rate. The Central
                                                                          there are the two challenges in this regard
                Statistics Office (CSO) data indicate that
                a ‘boom’ in private corporate investment
                in the high growth phase of 2004–08 was                   (a) Mobilisation of the financial resources
                accompanied by an increase in public                          to enhance public investment, and
                investment by about 1.5 per cent.                         (b) Implementation capacity.
                Similarily, a decline in public investment                To the extent implementation capacity is
                by more than 1 percentage point between                   concerned, a sector with the maximum
                2008–13, is accompanied by a general                      positive ‘spillovers’ together with
                decline in private corporate investment                   proven capacity for investing quickly
                by more than 8 percentage points                          and efficiently, can serve the purpose.
                                                                          Two such sectors are: rural roads and
       67.    w. w. Rostow, The Process of Economic Growth
              (Oxford: Clarendon Press, 2nd edition, 1960),       68.   International Monetary Fund, World Economic
              pp.        , cited in . . itchell, he Coming of the       Outlook-2014, Is it Time for an Infrastructure Push?
              Railway and United Kingdom Economic Growth), The          The Macroeconomic Effects of Public Investment,
              Journal of Economic History 24(3), september 1964.        October 2014.