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Growth and Non-Traded Sectors: The Scope of India’s Infrastructure

Explore the scope of India's non-traded infrastructure sectors and the challenges they face in terms of growth. This article examines the characteristics of these sectors, the need for government intervention, the link between infrastructure and economic growth, and the challenges ahead.

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Growth and Non-Traded Sectors: The Scope of India’s Infrastructure

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  1. An NRE’s Take on … Growth and Non-Traded Sectors: The Scope of India’s Infrastructure

  2. Non-Traded Sectors • Markets, in principle, clear locally. • Do not involve competition among international providers. • Characteristics of Non-traded services such as infrastructure (telecommunications, electricity, water and sewerage, natural gas, and transportation): a) extensive economies of scale and scope that generally lead to market concentration and inhibit competition; b) large sunk costs relative to fixed and variable costs; c) services deemed essential to a broad range of users, making their provision and pricing politically sensitive. • Natural target for government intervention.

  3. Infrastructure “ Our growth potential will be realized only if we can ensure that our infrastructure does not become a severe handicap.”

  4. Is there a Link? • The evidence is mixed. • Two-way causality.

  5. Telecommunication

  6. The Link

  7. … Looking BackMilestones in Infrastructure Reform in the United States

  8. … Looking BackPrivate Investment in Infrastructure in Developing and Transition Economies, by Sector(1990–2001)

  9. … Looking BackLatin America and the Caribbean Has Led Developing Regionsin Private Investment in Infrastructure, 1990–2001

  10. Looking Forward … Challenges ahead: • Sustained expansion of investment in and improved performance of her infrastructure sectors. • Institutional capabilities and organizational reforms that lend credibility and effectiveness to government policy. • Reforms directed toward drawing resources into expanding, modernizing, and improving infrastructure facilities and services: • Fair competition should be promoted by lowering entry barriers and giving entrants access to network infrastructure. • Innovations must be facilitated by focusing on goals to be achieved and giving operators and investors the leeway to introduce more efficient technologies and innovative service arrangements. • Absent adequate complementary investments, infrastructure alone is not likely to build the “road” for moving jobs to people in a world where people increasingly keep moving to jobs. • Need to design and effectively implement adequate governance mechanisms to compensate those adversely affected by the transformation of infrastructural services.

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