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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 are— 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.