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The development of a country wholly depends on the availability of its infrastructural facilities. Infrastructure plays a vital role in the improvement of the country’s standard of living. It also plays an important role in contributing to a higher rate of economic growth.


Economic infrastructure refers to the facilities, activities and services which support operation and development of other sectors of the economy. These facilities, activities and services help in increasing the overall productivity of the economy. They also play an essential role in facilitating the smooth running of all the sectors of the economy.

In addition, infrastructures are such basic requirements like railways, roads, ships, airways, communication, etc. They also include energy, banking, science, technology, health, education and other public utility concerns. Without the existence and presence of economic infrastructures, the growth and fast pace of the economy is impossible. Moreover, infrastructures of an economy are also termed as ‘social and economic overheads‘.


There are 2 broad classifications of economic infrastructures. They are as follows:

  1. Social infrastructure. They concern with the supply of such services as to meet the basic needs of a society. In simple words, social infrastructures refer those basic services such as education and training. It also includes health and sanitation, drinking water, housing, sewerage, etc. Social infrastructures are also termed as ‘social overheads’. These social overheads indirectly support the economic systems. They indirectly increase the productivity and the economy sees the impact after some time. Social infrastructures lead to growth in the long run.
  2. Physical infrastructure. Physical infrastructure is those infrastructures which directly concern themselves with the needs of such production sectors as agriculture, industry, trade, etc. In simple words, physical infrastructure directly supports the economic production. They also directly support the process of production and distribution in the economy. A few such examples are energy, irrigation, transportation, telecommunication, banking, insurance, technology, finance, etc. Physical infrastructures, however, directly increase the productivity and the economy sees the impact immediately. They also lead to an immediate growth in the short run.


According to Dr V. K. R. V. Rao, “The link between infrastructure and development is not a once for all affair. It is a continuous process and progress in development has to be preceded, accompanied and followed by progress in infrastructure; if we are to fulfil our declared objectives of a self-accelerating process of economic development”.

Discussed below are some of the most critical significance of economic infrastructure and its impact on the economy.

  • The smooth functioning of the economy. Infrastructural facilities are very necessary and vital for the smooth functioning of the economy. They are like wheels of development without which the economy will not be able to function properly.
  • Development of agriculture. The development of agriculture, to a considerable extent, depends on the adequate expansion and development of irrigation, credit, transport, power, marketing, training and education. It also depends on the improvement of research and development and other such facilities.
  • Development of industry. Industrial production requires not only machinery and equipment but also requires the following. Energy, skilled manpower, management, banking, insurance and transportation services are crucial. These activities and facilities will directly lead to the development of the industrial sector of the economy.
  • Promotion of investment. Infrastructural development is definitely a pre-condition got increasing economic investments. Those areas with the sound infrastructural base may succeed in attracting all the more capital for investment.
  • Improvement in productivity. Infrastructural development such as transportation facilities and education increase the productivity. Development of science and technology is also important in improving the economic productivity. Moreover, research and development also play a critical role in economic improvement.
  • Employee generation. Infrastructures play a crucial role in the generation of employment opportunities. They improve mobility, efficiency and productivity of labour. Moreover, larger investment, development of industry and agriculture create all the more employment opportunities.

Some of the secondary but essential significance of the economic infrastructure are as follows.

  • Development of backward regions. The development of backward regions and the removal of regional imbalances is yet another significant contribution of infrastructural facilities. The lack of infrastructural facilities in the backward regions will act as a constraint on the development of those regions.
  • Social change. Infrastructural facilities will also act as an instrument of social changes. Development of industries, transport facilities and education will change the outlook of people. Apart from these, even science, technology and growth of towns and cities will lead to a changed economic outlook.
  • The growth of GDP. There exists a very close relationship between spending for infrastructure and GDP growth. Studies reveal that 1% growth in the stock of infrastructure often associates with 1% growth in per capita GDP.
  • All round development/Overall development. Infrastructural development is important not only for economic growth but also for the overall development. The all-round development of the country and economy is crucial. Infrastructural facilities are also necessary for technological innovation. Along with technological innovation, economic infrastructural facilities are also important for the eradicating poverty and enhancing globalization.


Economic infrastructure is the nerve centre of the economic system. It plays an important role in the development of not only the economy but of the civilization as well. It is a public utility service which gives place and time utility to goods and services. They link production, distribution centres and the end consumers as well. Therefore, infrastructures bring together the elements of the economic system.

To conclude, let us discuss some of the prime importance of infrastructures.

  1. They help in the development of the market and all the elements within.
  2. It also facilitates large-scale production for the purpose of smooth functioning of the economy.
  3. They result in the territorial division of labour which is great.
  4. They also ensure price stability in the market.
  5. Economic infrastructure definitely ensures the mobility of labour and capital within/from the economy.
  6. It results in the overall growth of towns and cities.
  7. Infrastructures provide for a lot of employment generation and employment opportunities.
  8. They also play a crucial role in national defence activities.
  9. Infrastructures in the economy directly result in the unity of various economic components.
  10. The economy and the nation will be able to meet any emergencies that arise.
  11. It creates a place and time utility.
  12. Infrastructural development plays a vital role in the development of agriculture and industry.
  13. Infrastructure like transportation, communication and telecommunication breaks any economic isolation that prevails in the country.
  14. They are a great and rich source of revenue to the Government.
  15. The development of economic infrastructure will directly result in the development of economic trade.

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