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Infrastructure and economic growth: Of multiplier and network effects



economic growth

The need for infrastructure creation in India is now being widely debated and analysed. It would be prudent to try and better understand how infrastructure creation contributes to the economic well-being of a nation. Some of the fundamental questions that come to mind are: How much does infrastructure creation matter for an economy? What “multiplier effect” does infrastructure have?

Given the massive scale of infrastructure projects and, consequently, the public and private investment in such projects, it is worthwhile reiterating the economic, financial and social benefits of infrastructure creation. A better idea about the benefits that accrue from assets helps in making optimal decisions.

The link between infrastructure and economic growth has long been recognised. In a recent paper, titled “Growth and Infrastructure Investment in India: Achievements, Challenges and Opportunities”, Aswini Kumar Mishra, Kunapareddy Narendra, and Bibhu Prasad Kar have yet again established that a solid link between infrastructure and economic growth exists.

They find that not only do infrastructure investments have a “huge impact on national and local development, but also exhibits a very high rate of return, even compared to other investments, perhaps due to its spill-over or externality effects”. Two key takeaways from the paper are the “statistically significant” positive impact on growth that infrastructure investments have and the positive correlation among the various infrastructure sectors.

The second point implies that, for example, better transportation infrastructure helps the economy not just by contributing to growth directly, but also through assisting storage infrastructure in delivering better returns and eliminating wastage of goods. Warehousing infrastructure can add more value in an environment where the transportation linkages to the warehouses improve, and vice versa.

The ability to create great economic value from land at a significant distance from the centre of consumption depends on not just creating warehouse or light manufacturing infrastructure or growing crops on the land, but also on the ability to create facilities to transport goods so produced in the area to the consumption point. This ability to generate value through the “network effect” of infrastructure to create positive linkages between various assets is a crucial component to maximise the economic, financial and social value creation.

In the paper “IFC Economics Notes 1, The Impact of Infrastructure on Growth in Developing Countries”, Antonio Estache and Gregoire Garsous have some additional interesting takeaways. They maintain that the poorer a country, the more infrastructure matters to economic growth; but not surprisingly, they also conclude that the weaker the institutions (legal and administrative frameworks) in a country, the lower the growth payoff from infrastructure investments.

For an economy such as India, in which there is socio-economic movement as a significant part of the population continues to rise out of poverty to form the new middle class, the study points out the ability of investments to create infrastructure that the new middle-class entrants can utilise to improve their lives. Credible institutions, credible policies and an effective conflict-resolution mechanism matter more than ever in this context.

For the country to truly create the infrastructure that contributes to economic growth, strong institutions will be essential. In essence, “hard” infrastructure such as airports, seaports, railroads, telecom towers, power transmission networks and renewable energy can be created at a rapid pace with the optimal economic dynamics only when the so-called “soft” infrastructure of a robust regulatory regime is in place and fully functional.

While the direct impact of high-quality infrastructure is one that gets attention, the indirect advantages and “network effects” of infrastructure assets do not get as much attention, perhaps because they are harder to quantify. That said, finding the “correct” pace of infrastructure creation while working under the various constraints of regulations, financing and availability of skills is crucial.

While it is true that rapid infrastructure asset creation is needed, it is equally true that the necessary financing facilities must match the pace of such asset creation. It is essential that new assets are created with robust financing structures that can sustain over long periods of time. The recent issues in the infrastructure sector suggest that though avoiding low-quality assets is important, but it is equally important to avoid good assets funded using poor “capital structures”. Infrastructure assets do add significant economic value if countries can find the right balance between infrastructure creation and ensuring sustainability of financing.

(Taponeel Mukherjee heads Development Tracks, an infrastructure advisory firm. Views expressed are personal. He can be contacted at [email protected] or @Taponeel on Twitter)

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The US presidential elections and future of India-US relations




Donald Trump Joe Biden

As the coronavirus pandemic dominates global news in the United States, progress toward the next presidential election scheduled to be held on November 3 moves slowly forward. President Donald Trump had no real opposition in the Republican party and is running for re-election. And it has now become apparent that former Vice President Joe Biden will be his opponent as the Democratic candidate for president.

What would a Trump victory bode for the future of US-India relations? What would a Biden victory bode? Let me answer each of those questions in turn.

Given the love fests of Prime Minister Narendra Modi’s ‘Howdy Modi’ event in Houston, Texas, in which Trump participated in September of 2019, and Trump’s ‘Namaste Trump’ event hosted by Modi in India in February of this year, it might be assumed that the future for US-India relations is a splendid one. This would be an incorrect assumption.

Both of these events were more symbolic than substantive. Trump’s participation in them undoubtedly helped to persuade some — perhaps many — Indian American Modi supporters who voted for Hillary Clinton in 2016 to cast their ballots for Trump in 2020. Trump’s campaign team took steps to ensure this by holding an event at his Mar-a-Lago resort in which a group of prominent Indian Americans announced their plans to work for his re-election and to mobilize Indian Americans on his behalf.

To understand the future potential of India’s relations with the US. with Trump as president, however, it is necessary to look beyond these political moves and to examine the present state of those relations and Trump’s personal style.

In a word, the best way to characterize the current relations between the US and India is “functional”. The relationship was relatively good for the first two years of Trump’s presidency. In fact, near the end of 2018, Alice Wells, the Acting Assistant Secretary of State for South and Central Asia, was quoted in the media s saying: “This has been a landmark year for US-India ties as we build out stronger relationships across the board.”

Then, in 2019, the relations went off the track in the first half of the year after the US and India got into a tit-for-tat tariff war after the US terminated India’s Generalized System of Preferences which allowed India to send certain goods to the US duty-free. There have been continuing efforts to structure a “modest” trade deal since then. It was thought there might be some type of deal done in September of 2019 while Modi was in the US by year’s end, and then during Trump’s India visit. But, as of today, there is still no deal.

This inability to get any meaningful trade agreement in place speaks volumes about India’s potential future relations with India with Trump as president. So, too does Trump’s style.

Trump’s campaign slogans this time around are “Keep America Great” and “Promises Made, Promises Kept.” Trump is not a policy wonk and most of his effort will go toward “America First”. This involves making the US more isolated by withdrawing from international agreements, restructuring trade agreements, emphasizing building walls to stop immigrants at the border, using tariffs to block trade with countries who are taking away American jobs, and confronting businesses who are allegedlly stealing American trade secrets.

This perspective suggests what India can expect for its relations with the US if it has to deal with Trump for a second term as president. The relations will stay functional at best. As I have said before, that’s because the words partnership, cooperation and collaboration are not in Trump’s vocabulary. Nationalism, isolationism and protectionism are.

Joe Biden stands in stark contrast to President Trump both professionally and personally. Biden is a strategic thinker and doer with a solid eight-year track record of leadership experience as Vice-President in forging alliances that have made a difference around the world and he has also been a long-standing friend of India.

He was chairman of the Senate Foreign Relations Committee and a leading advocate for the Congressional passage of the Indo-US civic nuclear deal in 2005. At a dinner convened 10 years later in 2015 by the Confederation of Indian Industry and the Carnegie Endowment for International Peace, Vice President Biden discussed the tremendous joint progress that had been made by the two countries in the past and declared “We are on the cusp of a sea change decade.”

Early in his campaign for the Democratic nomination for president in July of 2019, in laying out his foreign policy vision, Biden stated that the US had to reach out to India and other Asian partners to strengthen ties with them. The items on Biden’s foreign policy agenda for strengthening which are of importance for India include climate change, nuclear proliferation and cyberwarfare.

During his vice presidency, Biden worked side by side with President Barack Obama to do things that would contribute to achieving Obama’s vision stated in 2010 of India and America being “indispensable partners in meeting the challenges of our time.” In 2020, those challenges are even greater than they were a decade ago.

That is why it is so essential that India and the US develop a strategic relationship that enables them to become those indispensable partners. That can happen if Biden assumes the presidency on January 20, 2021. It cannot happen if Donald Trump remains as president for a second term.

The results of this upcoming election in the US matter greatly for the future of the United States. They matter greatly for the future of India-US relations as well. Time and the American electorate will tell what that future will be.

(Frank F. Islam is an entrepreneur, civic and thought leader based in Washington DC. The views expressed here are personal)

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Covid-19 toll across world crosses 35,000

The COVID-19 is affecting 132 countries and territories around the world.



Patients infected with the novel coronavirus

New Delhi, March 30 : The death toll around the world due to coronavirus crossed 35,000 on Monday evening, with Italy heading the list of 35,097 deaths with 10,779, while the number of cumulative cases rose to 737,929, with US leading with 143,055 of them, as per data from the Johns Hopkins University’s Coronavirus Resource Centre.

Spain was second with 7,340 deaths, followed by China with 3,308 (3,186 of them in Hubei where the outbreak was first recorded), Iran with 2,757 deaths, France with 2,606 deaths, the US with 2,513 (776 of them in New York) and the UK with1,228 deaths.

In number of cases, Italy was second with 97,689, followed by Spain with 85,195, China with 82,198, Germany with 62,435, Iran with 41,495 and France with 40,747.

Meanwhile, 156,652 people around the world had recovered, with nearly half of them (75,923) in China, followed by 16,780 in Spain, 13,911 in Iran and 13,030 in Italy.

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45% of Indians do not back up their data, files: Survey

The survey was conducted among 728 Avast and AVG users between February 20-March 25.




Data Privacy

New Delhi, March 30 : Nearly half of Indians do not back up because they think their data or files are not important enough and most of those who back up their data, do it once a month, a survey said on Monday.

Other reasons cited by the respondents for not backing up their data included not knowing how to do it, not having time and forgetting about it, according to the survey by cybersecurity company Avast.

“It could be that many aren’t aware they are backing up, as it could be happening automatically, in the background, however, others really might not be backing up at all, thinking it is not worth it,” Luis Corrons, Security Evangelist at Avast, said in a statement.

“Losing personal documents, photos and videos can be a painful experience and it’s not until this happens that they realize how valuable it actually is,” Corrons added.

Of those who do back up their data, nearly 42 per cent Indians back up to a cloud storage, 36 42 per cent back up their data to an external hard drive, 23 42 per cent back up to a USB or flash disk, 18 42 per cent back up their phone to their PC, and 10 42 per cent back up to a network storage drive, the results showed.

Corrons recommended to back up data to two different locations, like the cloud, and a physical storage, like an external hard drive.

When it comes to iPhone and Android phone owners, the percentage that backs up is nearly the same, 69 per cent and 70 per cent respectively.

The percentage of smartphone owners that don’t know how to back up their data does not vary much between iPhone and Android owners, with 13 per cent and 17 per cent claiming not knowing how to, respectively, the study revealed.

Data loss can be caused by users accidentally deleting their data themselves, hardware damage and failure, as well as malware, causing valuable data such as photos, videos, documents, and messages to be lost forever.

Ransomware and other malware, such as wipers, can either encrypt or completely destroy files, and there is no guarantee that files can be decrypted if a ransom is paid.

The survey was conducted among 728 Avast and AVG users between February 20-March 25.

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COVID-19 affects different people in different ways. Most infected people will develop mild to moderate illness and recover without hospitalization.