18.30          ndian    onom
               railways. Enhancing road connectivity                        growth, the former can explain around 1.5-
               can have a huge positive spillover on                        2.9 percent of overall growth.
               the economy—this has been shown by                      (v) A study72 by the RBI reports the long run
               recent studies69 —the examples in case                       multiplier (of capital outlays on GDP) to
               are the National Highways Development                        be 2.4. The study also confirms that the
               Project and the PM Gram Sadak Yojana                         effect of revenue expenditure on GDP,
               of early 2000s. These public investment                      though high, fades out after the first
               moves encouraged rurl employment and                         year, suggesting gains from reprioritizing
               earnings.                                                    expenditures.
                                                                        Thus, the Survey has emphasised a big role of
                  The Survey believes that the present
                                                                  enhancing public investment in the railways sector.
               government should encourage public
                                                                  It could be started as only public investment. But
               investment in the hetherto neglected               soon, the impetus given by the government will
               railways sector—it has the potential to            generate enough avenues and new possibilities that
               have similar effects on the economy as             the sector will start attracting enough investment
               the road sector could do in past. This has         flows from the privates sector. Once such an effect is
               the potential to crowd in greater private          visible then there are several possible alternatives to
               investment and without jeopardising                promote investment—the PPP to dedicated private
               India’s public debt dynamics.                      inevstments. Railways being a lead infrastructure
        (iv) Public investment has direct positive                sector it will bring in multi-dimensional positive
               bearings on the growth prospects, as per           spillovers in the economy. Linking people and places
                                                                  has great potential in creating great many numbers
               the empirical studies. India’s productivity
                                                                  of openings in the economy.
               surge around 1980 was due to boost
               in productivity led by enhanced public
                                                                     current fIscal sItuatIon
               investments in the infrastructure sector
               (in contrast to the demand creating                The current fiscal situation (as per the latest
               effects).70 The study analyses the effects on      volumes of the Economic Survey 2017-18) of the
               overall growth using a framework71 where           General Governments (Centre as well as states)
               government infrastructure services are an          are as given below:
               input into private production. The results                   UDAY Scheme had a negative impact
               of the study indicate that allowing for                      on the fiscal position of the states—0.5
               the appropriate lag (of around five years)                   and 0.6 per cent in 2015-16 and 2016-
               between public infrastructure spending and                   17 respectively (in case of 26 states which
                                                                            opted for the Scheme).
      69.   sam Asher Paul Novosad, The Employment Effects of               The net market borrowings by the State
            Road Construction in Rural India, working Paper 2014,           Governments (as per the RBI), during
            quoted by the Ministry of Finance, Economic Survey
            2014–15.                                                        2017-18 (April- December) stood at Rs.
      70.     . odri , and . A. Su ramanian, rom Hindu                      2351.6 billion.
              rowth to roductivity Surge he ystery of the                   Coupled with the Central Government’s
            Indian Growth Transition, IMF Staff Papers, 52(2),
            2005.                                                           target for reducing fiscal deficit by 0.3
      71.   Robert Barro, ‘Government spending in a simple
                                                                    72.   Reserve Bank of India, Fiscal Multipliers in India,
            Model of Endogenous Growth”, Journal of Political
                                                                          Box II.16, Annual Report 2011–12, (New Delhi:
            Economy, 98(5) 1990.
                                                                          Government of India, 2012).