Public Infrastructure

Public infrastructure is defined as a country or state construction, facilities, systems, concrete, and other structures owned and maintained by the government, i.e., the Central Government, State Government, government company, or any other public undertaking or organization.

Such facilities and services are available for the public with/ without applicable charges. It includes facilities like roads, water, electricity, telecom, etc. There is a need for reliable and safe physical structures essential for a thriving economy and an efficient society. Effectively enforced laws and safety codes to help in curtailing illegal practices like corruption and allow the infrastructure market to be more reliable and physically secured.

• Public infrastructure refers to the country or state construction, facilities, concrete, systems, and other structures government owns and maintains. It includes the Central Government, State Government, government company, or other public undertaking and organization.
• These services and facilities are accessible with/without applicable charges for the public. It involves electricity, water, roads, and telecom.
• Examples of public infrastructure are political infrastructure, transportation infrastructure, power, and energy infrastructure, telecommunication infrastructure, educational infrastructure, health infrastructure, water infrastructure, and recreational infrastructure.
• Public infrastructure is crucial for faster and more comprehensive economic growth shared by the majority of the country. 

The terms public infrastructure means any structure in the physical form or organizational form that is essential for the development of the society and economy as a whole.  It leads to proper and smooth functioning of the system. These infrastructure facilities are operated, owned and managed by the public or government enterprises and help in supporting the general public to meet their needs.

All the infrastructure facilities for general public use, such as roads, telecommunication, railways, water supply, public parks, schools, and universities, can be commonly mentioned under a single term – “public infrastructure.” These essential systems and facilities aid in an economy’s continuous, seamless, and smooth flow. These key public infrastructure can be described as basic facilities that serve the country’s citizens and help in a thriving economy. It enhances the living standards of society by providing essential commodities and services to sustain a good life. The level of such investment done by a country defines the development level of that economy. It plays a very important role in enabling. functioning of economic activities by using both tangible and intangible assets.

Activities and facilities of public infrastructure investment like transportation, basic public utility like water and electricity supply, telecommunication, energy, educational and healthcare infrastructure contribute to the development and wellbeing of the society.

Even safety and recreation services are very important so people can be assured of a safe and healthy living environment where they can also practice their cultural activities and access any recreational facility for all-round development.

This explains the fact that any form of public infrastructure is crucial for overall economic and infrastructural growth, to add positive value to the quality. of life and ensure smooth and healthy progress in society.  However, the process is not easy. It requires a lot of skilled and careful planning along with investment from the part of the government or organizations who take the responsibility of implementation and maintenance of the same.

Public infrastructure investment is one of the pillars of the economy. The government should adequately plan its investment and utilization.

1. Political Infrastructure - All governmental institutions such as regulatory bodies, administrative units, law courts, and public security services such as defense, police force, etc.
2. Transportation Infrastructure - Roadways, railways, airways, waterways, and all other mediums of transportation fall under transportation infrastructure.
3. Power and Energy Infrastructure - Solar panels, wind turbines, power grids and stations, gas pipelines, and other sources of power and energy.
4. Telecommunication Infrastructure - Wi-Fi services, broadband network, telephone network owned by government bodies.
5. Educational Infrastructure - Public academic and training institutions, public schools, libraries, and universities.
6. Health Infrastructure - Government hospitals, subsidized health clinics, etc., are included in public health infrastructure.
7. Water Infrastructure - Drainage and sewage systems, water supply, water resource management, postal restoration, and flood management.
8. Recreational Infrastructure - Natural reserves such as national parks, botanical gardens, natural parks, public gardens, historical sites, and beaches.

The government finances key public infrastructure investments by employing distortionary funds collected from taxes, charges, cess, etc. The value of investments is measured based on policy process critical inputs, cost function, and aggregate productions. Investment in infrastructure is the tool of anti-recessionary fiscal policy. When the country’s economy struggles, public economists and politicians, emphasize greater infrastructure spending as it forms a stimulus for the economy's growth. However, there is little practical evidence that proves investment is positive for the economy. Hence, there is a disconnection between political rhetoric and economic reality. Government spending is based on the Keynesian economics assumes that when the economy is unproductive, it can revive it to its full capacity by using public expenditures. Specifically, for infrastructure, the government spends with the belief that involuntarily unemployed persons can be employed in public infrastructure jobs and receive income that aids in promoting growth.

Such investments in public infrastructure companies demand high-cost investment projects, which also yield higher returns. Hence, along with the government, some private companies also invest in public infrastructure projects to expand their business. Such investments are beneficial for both companies as well as the economy.

Low real interest rates generate a multiplier effect on the economy's growth.

Let us look at some of the importance of the process of public infrastructure projects in detail.

• Public infrastructure is important for faster and more inclusive economic growth shared by the country's majority.
• It helps in the alleviation of poverty and reduction of income distribution inequality. This is because these utilities need skilled labour force for designing, implementation and maintenance. This creates a lot of job opportunity within the community and enhances the source and amount of income, in turn leading to better living standard.
• The expansion in public infrastructure projects facilities such as roads and road transport, rural electrification, and irrigation promotes agricultural growth. Also, it helps set up agro-processing industries, which in turn benefit farmers in fulfilling their requirement of fertilizers, raw materials, and various other inputs at a feasible rate.
• Roads help them bring their produce to the market to earn huge profits. If proper roads are not there, farmers will have a hard time while trying to bring the produce to the retailers or consumers, especially if they are perishable within a short time period. Produce will be wasted leading to loss of revenue, profits, resources and time.
• Essential social services like health care and education, when provided through it, also help in boosting the economy, reaching the last person in the community, and helps in providing equal distribution of services. Development of proper educational facility is essential for training the future generation so that they can contribute enough to the society in a productive way.
• Adequate infrastructure facilities also help expand trade and promote foreign business by improving ports and airports. This is extremely important in order to globalize the economy. Every country does not have the proper resource or facility to produce every thing required within the society. This is where trade comes in which can be smoothly doen if the country has proper infrastructure.

Let us look at some of the advantages of the system.

• Helps ensure required investment into the public sector and better management of public resources.
• General services provided through public infrastructure ensure a higher quality of services and timely provisions for the public.
• The cost of investment projects is predetermined and implemented in due terms that help eliminate unforeseen expenditures.
• Private sector expertise is utilized in implementing infrastructure projects that assist in delivering a high quality of infrastructure.
• Initial investments in such projects are financed by the public sector and later recovered by the community as the project profit.
• It helps boost the employment rate of the economy as it employs various unemployed persons to build infrastructure projects at sustainable wages.
• It connects households across all the cities and towns of the country, ensuring a better quality of opportunities such as healthcare, education, employment, broadband networks, etc.

However, some disadvantages of the system of public infrastructure companies are as follows.

• It takes much more time to complete than those with private infrastructure.
• The scope of innovation in public infrastructure projects is very low. That is because public projects do not develop ideas and designs but rather follow the old school process in implementing the project.
• Chances of corruption are more in these projects. That is because the money allotted for the project may not be wholly used but rather gets channelized between various public departments involved in the project's implementation.
• Quality in public infrastructure investment gets compromised as the government's primary aim is to provide the service irrespective of the institutions and infrastructure's quality and standard.

Infrastructural development are a part and parcel of any society. However, both the above are two different models to manage the essential services. Let us compare the same and find the basic differences.

• The former is owner, implemented and maintained by the government or any other public organization but the latter is owned and maintained by private entities.
• In case of the former, the government itself is responsible for taking decisions regarding the planning, investment and arrangement for funds whereas in case of the latter, funding and investment is taken care of by the private entities.
• For the public infrastructure investment, funds are arranges through government budgets, money collected through issue of government bonds to the general public, money collected form taxpayers and other government revenue sources. But in case of private investments, the funding comes from private investments.
• The main purpose of the former is to serve the society and uplift the general condition of people living in the country though equal distribution of resource, whereas the main purpose of the latter is to enhance efficiency and promote ways and means to become profitable.
• The accountability of the former lies with the government, who elect officials who oversee the implementation and maintenance of the same, whereas the latter is looked after and accountability lies with the private organizations and bodies who maintain them.

It is to be noted that there are many hybrid models that are being used in the society today which are a combination of private and public which has advantages as well as disadvantages. But depending on the resource availability and condition of the society, these models also work well if implemented in a structured and planned manner. ‘

This article is a guide to what is Public Infrastructure. We explain it with example, investments, differences with private infrastructure & importance. Also, you may learn more about financing from the following articles: -

• Voodoo Economics
• Microeconomics Formula
• Equity in Economics
• Applied Economics