Rural Infrastructure and Growth: An Overview

Rural infrastructure is crucial for agriculture, agro-industries and overall economic development of rural areas. It also, incidentally, provides basic amenities that improve the quality of life. However, infrastructure projects, including those in rural sector, involve huge initial investments, long gestation periods, high incremental capital output ratio, high risk and low rate of returns on investment. All these factors are not conducive for private sector entry into infrastructure. Further there are many attributes of infrastructure that make it difficult for individuals to design, construct, operate and maintain these services effectively and efficiently. As a result of this, infrastructure services, the world over, are largely provided by the public sector. Thus there are often good reasons for public sector involvement in the provision of rural infrastructure services, however in the production of such services there exists a role for other than public sector entities also (Ostrom et al., 1993) Infrastructure is an umbrella term for many activities referred to as social overhead capital by development economists as Arthur Lewis, Rosenstein-Rodan, Ragner Nurkse and Albert Hirschman. Lewis included public utilities, ports, water supply and electricity as infrastructure (Lewis, 1955) whereas Hirschman outlined four conditions that characterise infrastructure or social overhead capital: the services provided to facilitate or are basic to economic activity; the services are usually public goods because of economic externalities; these services cannot be imported; these investments tend to be indivisible or ‘lumpy’ (Hirschman, 1958). Later, in the sixties, besides the above, emphasis was laid on agricultural research, extension and rural financial institutions as important elements of infrastructure, due to increasing recognition of the role of agriculture in economic development and the vital role that infrastructure plays in generating agricultural growth (de Vries, 1960; Ishikawa, 1967). The World Development Report of 1994 included the following in its definition of infrastructure