Relationship between Infrastructure Investment and Economic Development in India – A Comparative Study between Pre and Post Economic Reform Period

The investment in infrastructure during the Tenth plan was Rs.887794 crore which constituted 5.07 percent of GDP. This included Rs.175203 crore of investment by the private sector. To overcome the infrastructure deficit, the eleventh plan has projected an investment of Rs. 2056150 crore which would imply an investment of 7.6 percent of GDP during the eleventh plan and 9 percent of GDP in the terminal year of the plan (2011–2010). This included public sector investment of Rs 765622 core in the central sector and Rs.670937 core in the state sector, leaving the balance of Rs.619591 crore to be invested by the private sector. The private capital would thus fund 30 percent of the total investment during the XI^th plan as compared to 20% realized during the Tenth plan (11th plan document). In this backdrop, it is hypothesized that there is a strong relationship between infrastructure development and economic growth. Hence, an attempt was made to analyze the relationship between infrastructure investment and economic development. The following were the specific objectives of the study. The finding of the study shows that the crude petroleum sector was the main factor behind the slackening growth of infrastructure industry in the post reform period. Though the investment in refinery had contributed to the development of the economy in the post reform period, less investment in crude petroleum sector had deteriorated the economic development.