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

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.

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

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

Telecommunication

The Link

… Looking Back Milestones in Infrastructure Reform in the United States

… Looking Back Private Investment in Infrastructure in Developing and Transition Economies, by Sector (1990–2001)

… Looking Back Latin America and the Caribbean Has Led Developing Regions in Private Investment in Infrastructure, 1990–2001

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.