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).