Public Infrastructure Definition Examples And Importance

Public Infrastructure Definition

Explanation

All the infrastructureInfrastructureInfrastructure refers to fundamental physical and technological frameworks that a region or industry establishes for its economy to function properly.read more 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 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 commoditiesCommoditiesA commodity refers to a good convertible into another product or service of more value through trade and commerce activities. It serves as an input or raw material for the manufacturing and production units.read more and services to sustain a good life. The level of such investment done by a country defines the development level of that economy.

Examples of Public Infrastructure

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Key Takeaways

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

Public Infrastructure Investment

The government finances public infrastructure investmentsInvestmentsInvestments are typically assets bought at present with the expectation of higher returns in the future. Its consumption is foregone now for benefits that investors can reap from it later.read more 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 Fiscal PolicyFiscal policy refers to government measures utilizing tax revenue and expenditure as a tool to attain economic objectives. read more. When the country’s economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society.read more 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 economicsKeynesian EconomicsKeynesian Economics is a theory that relates the total spending with inflation and output in an economy. It suggests that increasing government expenditure and reducing taxes will result in increased market demand and pull up the economy out of depression.read more 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 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 ratesReal Interest RatesReal interest rates are interest rates calculated after taking inflation into account. It is a means of obtaining inflation-adjusted returns on various deposits, loans, and advances, and thus reflect the real cost of funds to the borrower. read more generate a multiplier effect on the economy’s growth.

Importance

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 inequalityIncome Distribution InequalityIncome inequality refers to the crucial imbalance of income dispersal across the population.read more. The expansion in its 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 materialsRaw MaterialsRaw materials inventory is the cost of products in the inventory of the company which has not been used for finished products and work in progress inventory. Raw material inventory is part of inventory cost which is reported under current assets on the balance sheet.read more, and various other inputs at a feasible rate. Roads help them bring their produce to the market to earn huge profitsProfitsProfit refers to the earnings that an individual or business takes home after all the costs are paid. In economics, the term is associated with monetary gains. read more. 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. Adequate infrastructure facilities also help expand trade and promote foreign business by improving ports and airports.

Advantages

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 sectorPrivate SectorThe private sector is a section of the national economy that the government does not own. The business conducted under this sector is carried out by companies or entrepreneurs who focus on profit maximization and customer satisfaction.read more 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.

Disadvantages

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 gets compromised as the government’s primary aim is to provide the service irrespective of the institutions and infrastructure’s quality and standard.

Conclusion

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