Physical and Digital Infrastructure 2022-23 | Indian Economy for UPSC CSE PDF Download

 Page 1


CHAPTER
12
The invention of the wheel set in motion the necessity of travelable paths, and since then 
the saga of infrastructure has expanded from canals to modern capital structures such as 
railways, roads etc. depending on the necessities of the region. In the last 75 years in India 
since Independence, infrastructure development has moved on a consistent growth curve 
building the assets required by the nation across sectors such as transportation, housing, 
commercial development, telecom and most recently, sanitation. As a key enabler of socio-
economic enhancement of a region, the government has used ‘social overhead capital’ 
to push development in the remotest areas of the country through dedicated budgetary 
allocation, cross-subsidising revenue-generating infrastructure and focussed programme 
delivery. This has helped in expanding physical transportation and connectivity, providing 
services at point-of-use and deepening digital penetration.
Infrastructure, being a melange of numerous sectors, its multiplier effects in the economy 
cannot be realised if it operates in silos. Thus, in 2019, Government of India adopted 
a forward-looking programmatic approach towards infrastructure. The National 
Infrastructure Pipeline was born with a projected investment of around ?111 lakh crore 
for FY20-25 for developing a comprehensive view of infrastructure development in 
the country, monitoring its progress at the highest levels in the government for timely 
completion, and enabling a pipeline view for investors for them to plan infrastructure 
investments. The funding for infrastructure comes from a variety of sources, from 
government to private sector to multilateral. However, given the quantum of funding 
involved, a creative financing option such as asset monetisation was also envisaged 
through the 5 lakh crore National Monetisation Pipeline. Apart from generating critical 
financial resources, private participation in running risk-free brownfield assets will also 
help in ushering in operational efficiencies and better management of public assets. 
The programmatic approach to infrastructure is complemented by structural and 
financial reforms such as infrastructure financing options of InvITs and REITs, creation of 
Dedicated Financing Institution (NaBFID), recapitalisation of other sectoral DFIs, push 
to PPP ecosystem through Model Concession Agreements by line ministries and enabling 
social infrastructure development through the revamped Viability Gap Funding scheme.
To bring in further convergence with comprehensive planning across centre and states, 
PM GatiShakti has sectoral complementarity of logistics facilitation through the National 
Logistics Policy launched in Sept 2022. All of this is expected to tighten the nuts and bolts 
for the arduous infrastructure journey that our country has undertaken together by the 
Physical and digital  
infrastructure: lifting 
Potential growth
Page 2


CHAPTER
12
The invention of the wheel set in motion the necessity of travelable paths, and since then 
the saga of infrastructure has expanded from canals to modern capital structures such as 
railways, roads etc. depending on the necessities of the region. In the last 75 years in India 
since Independence, infrastructure development has moved on a consistent growth curve 
building the assets required by the nation across sectors such as transportation, housing, 
commercial development, telecom and most recently, sanitation. As a key enabler of socio-
economic enhancement of a region, the government has used ‘social overhead capital’ 
to push development in the remotest areas of the country through dedicated budgetary 
allocation, cross-subsidising revenue-generating infrastructure and focussed programme 
delivery. This has helped in expanding physical transportation and connectivity, providing 
services at point-of-use and deepening digital penetration.
Infrastructure, being a melange of numerous sectors, its multiplier effects in the economy 
cannot be realised if it operates in silos. Thus, in 2019, Government of India adopted 
a forward-looking programmatic approach towards infrastructure. The National 
Infrastructure Pipeline was born with a projected investment of around ?111 lakh crore 
for FY20-25 for developing a comprehensive view of infrastructure development in 
the country, monitoring its progress at the highest levels in the government for timely 
completion, and enabling a pipeline view for investors for them to plan infrastructure 
investments. The funding for infrastructure comes from a variety of sources, from 
government to private sector to multilateral. However, given the quantum of funding 
involved, a creative financing option such as asset monetisation was also envisaged 
through the 5 lakh crore National Monetisation Pipeline. Apart from generating critical 
financial resources, private participation in running risk-free brownfield assets will also 
help in ushering in operational efficiencies and better management of public assets. 
The programmatic approach to infrastructure is complemented by structural and 
financial reforms such as infrastructure financing options of InvITs and REITs, creation of 
Dedicated Financing Institution (NaBFID), recapitalisation of other sectoral DFIs, push 
to PPP ecosystem through Model Concession Agreements by line ministries and enabling 
social infrastructure development through the revamped Viability Gap Funding scheme.
To bring in further convergence with comprehensive planning across centre and states, 
PM GatiShakti has sectoral complementarity of logistics facilitation through the National 
Logistics Policy launched in Sept 2022. All of this is expected to tighten the nuts and bolts 
for the arduous infrastructure journey that our country has undertaken together by the 
Physical and digital  
infrastructure: lifting 
Potential growth
342 Economic Survey 2022-23
participation of centre, state, local governments and the private sector.
This story has seen many successes. While roads, railways, and waterways have 
seen unprecedented expansion in the last eight years, ports and airports have been 
substantially upgraded. This has also helped the country move from unimodal to multi-
modal transportation, providing a window of opportunity to the private sector to invest 
and reinvest in these assets, which has already been facilitated by the policy of asset 
monetisation.  Extending infrastructural facilities is only part of the story; modernisation 
is the other important principle that has been attempted with verve and achieved with 
commendable speed.  
In keeping with the winds of change around the globe, we have placed a great emphasis 
on digital and communications development, but, have taken the principle to new heights 
in terms of usability, interoperability and accessibility. The country has come a long way 
from a time when a basic telephone connection was viewed as a luxury, to a stage where 
most individuals now have a mobile connection. It is not a hyperbole to state that with 
the thrust on Digital India, the story of digital infrastructure and services in India will 
always be seen by the world with a certain regard and appreciation. In a very short time, 
the country has seen a great multiplier effect on social and economic growth through 
the different uses of digital enablement led by the humble mobile phone and the Aadhar 
number– targeted beneficiary identification for various benefits, provision of healthcare 
and education services and financial inclusion.  Close on this, arrived the success story 
of India’s sui-generis payment infrastructure (UPI), which travelled internationally with 
select adoption and global acclaim. The bouquet of digital public infrastructure products 
like e-rupi,e-way bill, TReDS for MSMEs etc have ensured real value for money to 
consumers while reducing the compliance burden for producers.  And now, with the vision 
of $1 trillion digital economy by 2025, the government is marching towards providing 
more and more e-governance based services.
All of these developments are a testament to the fact that India has been one of the few 
countries where innovation in technology and digital connectivity has been and continues 
to be led by the public sector. The success of UPI, a common platform that serves as 
the backbone for diverse developments, has prompted government to task itself with 
another innovative attempt towards democratising digital commerce through the ONDC 
which could potentially transform how businesses and consumers interact at present. 
Empowering the end-users with control over their data is an essential ongoing task that 
is guided by the Account Aggregator framework. 
As the developments would indicate, the world has moved seamlessly from the focus 
on physical infrastructure to investing in digital infrastructure. Moving forward, it is 
almost a certainty that most of the future real-world applications are going to marry 
the two, something akin to that attempted under Smart Cities, that interlocks area-based 
development with digital assets and digital services. 
In the context of unique challenges, which only a country with a billion people can face, 
India’ s infrastructure journey has been global in outlook, but domestic in innovation and 
implementation.
Page 3


CHAPTER
12
The invention of the wheel set in motion the necessity of travelable paths, and since then 
the saga of infrastructure has expanded from canals to modern capital structures such as 
railways, roads etc. depending on the necessities of the region. In the last 75 years in India 
since Independence, infrastructure development has moved on a consistent growth curve 
building the assets required by the nation across sectors such as transportation, housing, 
commercial development, telecom and most recently, sanitation. As a key enabler of socio-
economic enhancement of a region, the government has used ‘social overhead capital’ 
to push development in the remotest areas of the country through dedicated budgetary 
allocation, cross-subsidising revenue-generating infrastructure and focussed programme 
delivery. This has helped in expanding physical transportation and connectivity, providing 
services at point-of-use and deepening digital penetration.
Infrastructure, being a melange of numerous sectors, its multiplier effects in the economy 
cannot be realised if it operates in silos. Thus, in 2019, Government of India adopted 
a forward-looking programmatic approach towards infrastructure. The National 
Infrastructure Pipeline was born with a projected investment of around ?111 lakh crore 
for FY20-25 for developing a comprehensive view of infrastructure development in 
the country, monitoring its progress at the highest levels in the government for timely 
completion, and enabling a pipeline view for investors for them to plan infrastructure 
investments. The funding for infrastructure comes from a variety of sources, from 
government to private sector to multilateral. However, given the quantum of funding 
involved, a creative financing option such as asset monetisation was also envisaged 
through the 5 lakh crore National Monetisation Pipeline. Apart from generating critical 
financial resources, private participation in running risk-free brownfield assets will also 
help in ushering in operational efficiencies and better management of public assets. 
The programmatic approach to infrastructure is complemented by structural and 
financial reforms such as infrastructure financing options of InvITs and REITs, creation of 
Dedicated Financing Institution (NaBFID), recapitalisation of other sectoral DFIs, push 
to PPP ecosystem through Model Concession Agreements by line ministries and enabling 
social infrastructure development through the revamped Viability Gap Funding scheme.
To bring in further convergence with comprehensive planning across centre and states, 
PM GatiShakti has sectoral complementarity of logistics facilitation through the National 
Logistics Policy launched in Sept 2022. All of this is expected to tighten the nuts and bolts 
for the arduous infrastructure journey that our country has undertaken together by the 
Physical and digital  
infrastructure: lifting 
Potential growth
342 Economic Survey 2022-23
participation of centre, state, local governments and the private sector.
This story has seen many successes. While roads, railways, and waterways have 
seen unprecedented expansion in the last eight years, ports and airports have been 
substantially upgraded. This has also helped the country move from unimodal to multi-
modal transportation, providing a window of opportunity to the private sector to invest 
and reinvest in these assets, which has already been facilitated by the policy of asset 
monetisation.  Extending infrastructural facilities is only part of the story; modernisation 
is the other important principle that has been attempted with verve and achieved with 
commendable speed.  
In keeping with the winds of change around the globe, we have placed a great emphasis 
on digital and communications development, but, have taken the principle to new heights 
in terms of usability, interoperability and accessibility. The country has come a long way 
from a time when a basic telephone connection was viewed as a luxury, to a stage where 
most individuals now have a mobile connection. It is not a hyperbole to state that with 
the thrust on Digital India, the story of digital infrastructure and services in India will 
always be seen by the world with a certain regard and appreciation. In a very short time, 
the country has seen a great multiplier effect on social and economic growth through 
the different uses of digital enablement led by the humble mobile phone and the Aadhar 
number– targeted beneficiary identification for various benefits, provision of healthcare 
and education services and financial inclusion.  Close on this, arrived the success story 
of India’s sui-generis payment infrastructure (UPI), which travelled internationally with 
select adoption and global acclaim. The bouquet of digital public infrastructure products 
like e-rupi,e-way bill, TReDS for MSMEs etc have ensured real value for money to 
consumers while reducing the compliance burden for producers.  And now, with the vision 
of $1 trillion digital economy by 2025, the government is marching towards providing 
more and more e-governance based services.
All of these developments are a testament to the fact that India has been one of the few 
countries where innovation in technology and digital connectivity has been and continues 
to be led by the public sector. The success of UPI, a common platform that serves as 
the backbone for diverse developments, has prompted government to task itself with 
another innovative attempt towards democratising digital commerce through the ONDC 
which could potentially transform how businesses and consumers interact at present. 
Empowering the end-users with control over their data is an essential ongoing task that 
is guided by the Account Aggregator framework. 
As the developments would indicate, the world has moved seamlessly from the focus 
on physical infrastructure to investing in digital infrastructure. Moving forward, it is 
almost a certainty that most of the future real-world applications are going to marry 
the two, something akin to that attempted under Smart Cities, that interlocks area-based 
development with digital assets and digital services. 
In the context of unique challenges, which only a country with a billion people can face, 
India’ s infrastructure journey has been global in outlook, but domestic in innovation and 
implementation.
343 Physical and Digital Infrastructure: Lifting Potential Growth
introduction
12.1 As India completes 75 years of Independence, the nation is evolving into a prominent 
force in the global economic order. India is the world’s fifth largest economy and the prospect of 
steady progress in the coming years is bright. Here, the critical role played by infrastructure in 
economic growth cannot be overemphasised. Investing in high-quality infrastructure
1
 is crucial 
for accelerating economic growth and sustaining it in the long run. As the empirical evidence 
states, this has a salutary effect on the productivity and efficiency of Indian manufacturing firms
2
. 
It further plays a significant role in poverty reduction
3
 and promotes both rural and agricultural 
development
4,5
. Empirical evidence also points to the positive effect of infrastructure towards 
bringing overall economic growth in India
6
. 
figure Xii.1: Quantity and quality of infrastructure and level of 
economic development across countries are strongly correlated
 
0
20000
40000
60000
80000
100000
100 600 1100 1600 2100
GDP per capita, current 
international $
Total infrastructure investment per 
capita, constant 2015 US$
Correlation: 0.75
0
20000
40000
60000
80000
100000
120000
1 3 5 7
GDP per capita, current 
international $
Quality of overall infrastructure
Correlation: 0.76
Note: The left graph pertains to 2019, and the right graph pertains to 2018.
Quality of overall infrastructure: 1=worst and 7=best.
Source: World Bank, Global Infrastructure Hub, and World Economic Forum Global Competitiveness Index
12.2 The above correlation between infrastructure and development brings us to the present 
scenario when during the times of pandemic and geo-political crisis, the government kept its 
focus on reforms in areas of physical, digital and regulatory infrastructure. In order to increase the 
private sector participation in creation of new infrastructure and development of existing ones, 
the government took initiatives like Public-Private Partnership (PPP), National Infrastructure 
Pipeline (NIP) and National Monetisation Pipeline (NMP). In addition to this, as part of the 
structural reforms with the objective to enhance efficiencies and cost competitiveness, Gati 
1
 In a broad sense, the term infrastructure refers to the “…physical facilities, institutions and organisational structures, or the social and eco-
nomic foundations, for the operation of a society” (World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge. 
United Nations Conference on Trade and Development.). The present chapter focuses only on emerging issues in the context of physical and 
digital infrastructure. Separate chapters of this survey provide in-depth views on social infrastructure and financial infrastructure related issues.
2
 Mitra, A., Varoudakis, A., & Véganzonès-Varoudakis, M. (2002). Productivity and Technical Efficiency in Indian States’ Manufacturing: The 
Role of Infrastructure. Economic Development and Cultural Change, 50(2), 395–426. DOI:10.1086/321916.
3
 Dutt, G. and Ravallion, M. (1998). Why have some Indian States Done Better than Others at Reducing Rural Poverty? Economica, 65: 17-38. 
https://doi.org/10.1111/1468-0335.00112
4
 Binswanger, H; Khandker, R. & Rosenzweig, M. (1993). How infrastructure and financial institutions affect agricultural output and invest-
ment in India, Journal of Development Economics, V olume 41, Issue 2, 1993, Pages 337-366, https://doi.org/10.1016/0304-3878(93)90062-R.
5
 Fan, S., Hazell, P. and Thorat, S. (2000). Government Spending, Growth and Poverty in Rural India. American Journal of Agricultural Eco-
nomics, 82: 1038-1051. https://doi.org/10.1111/0002-9092.00101.
6
 Sahoo, P. & Dash, R. (2009) Infrastructure development and economic growth in India, Journal of the Asia Pacific Economy, 14:4, 351-365, 
DOI:10.1080/13547860903169340
Page 4


CHAPTER
12
The invention of the wheel set in motion the necessity of travelable paths, and since then 
the saga of infrastructure has expanded from canals to modern capital structures such as 
railways, roads etc. depending on the necessities of the region. In the last 75 years in India 
since Independence, infrastructure development has moved on a consistent growth curve 
building the assets required by the nation across sectors such as transportation, housing, 
commercial development, telecom and most recently, sanitation. As a key enabler of socio-
economic enhancement of a region, the government has used ‘social overhead capital’ 
to push development in the remotest areas of the country through dedicated budgetary 
allocation, cross-subsidising revenue-generating infrastructure and focussed programme 
delivery. This has helped in expanding physical transportation and connectivity, providing 
services at point-of-use and deepening digital penetration.
Infrastructure, being a melange of numerous sectors, its multiplier effects in the economy 
cannot be realised if it operates in silos. Thus, in 2019, Government of India adopted 
a forward-looking programmatic approach towards infrastructure. The National 
Infrastructure Pipeline was born with a projected investment of around ?111 lakh crore 
for FY20-25 for developing a comprehensive view of infrastructure development in 
the country, monitoring its progress at the highest levels in the government for timely 
completion, and enabling a pipeline view for investors for them to plan infrastructure 
investments. The funding for infrastructure comes from a variety of sources, from 
government to private sector to multilateral. However, given the quantum of funding 
involved, a creative financing option such as asset monetisation was also envisaged 
through the 5 lakh crore National Monetisation Pipeline. Apart from generating critical 
financial resources, private participation in running risk-free brownfield assets will also 
help in ushering in operational efficiencies and better management of public assets. 
The programmatic approach to infrastructure is complemented by structural and 
financial reforms such as infrastructure financing options of InvITs and REITs, creation of 
Dedicated Financing Institution (NaBFID), recapitalisation of other sectoral DFIs, push 
to PPP ecosystem through Model Concession Agreements by line ministries and enabling 
social infrastructure development through the revamped Viability Gap Funding scheme.
To bring in further convergence with comprehensive planning across centre and states, 
PM GatiShakti has sectoral complementarity of logistics facilitation through the National 
Logistics Policy launched in Sept 2022. All of this is expected to tighten the nuts and bolts 
for the arduous infrastructure journey that our country has undertaken together by the 
Physical and digital  
infrastructure: lifting 
Potential growth
342 Economic Survey 2022-23
participation of centre, state, local governments and the private sector.
This story has seen many successes. While roads, railways, and waterways have 
seen unprecedented expansion in the last eight years, ports and airports have been 
substantially upgraded. This has also helped the country move from unimodal to multi-
modal transportation, providing a window of opportunity to the private sector to invest 
and reinvest in these assets, which has already been facilitated by the policy of asset 
monetisation.  Extending infrastructural facilities is only part of the story; modernisation 
is the other important principle that has been attempted with verve and achieved with 
commendable speed.  
In keeping with the winds of change around the globe, we have placed a great emphasis 
on digital and communications development, but, have taken the principle to new heights 
in terms of usability, interoperability and accessibility. The country has come a long way 
from a time when a basic telephone connection was viewed as a luxury, to a stage where 
most individuals now have a mobile connection. It is not a hyperbole to state that with 
the thrust on Digital India, the story of digital infrastructure and services in India will 
always be seen by the world with a certain regard and appreciation. In a very short time, 
the country has seen a great multiplier effect on social and economic growth through 
the different uses of digital enablement led by the humble mobile phone and the Aadhar 
number– targeted beneficiary identification for various benefits, provision of healthcare 
and education services and financial inclusion.  Close on this, arrived the success story 
of India’s sui-generis payment infrastructure (UPI), which travelled internationally with 
select adoption and global acclaim. The bouquet of digital public infrastructure products 
like e-rupi,e-way bill, TReDS for MSMEs etc have ensured real value for money to 
consumers while reducing the compliance burden for producers.  And now, with the vision 
of $1 trillion digital economy by 2025, the government is marching towards providing 
more and more e-governance based services.
All of these developments are a testament to the fact that India has been one of the few 
countries where innovation in technology and digital connectivity has been and continues 
to be led by the public sector. The success of UPI, a common platform that serves as 
the backbone for diverse developments, has prompted government to task itself with 
another innovative attempt towards democratising digital commerce through the ONDC 
which could potentially transform how businesses and consumers interact at present. 
Empowering the end-users with control over their data is an essential ongoing task that 
is guided by the Account Aggregator framework. 
As the developments would indicate, the world has moved seamlessly from the focus 
on physical infrastructure to investing in digital infrastructure. Moving forward, it is 
almost a certainty that most of the future real-world applications are going to marry 
the two, something akin to that attempted under Smart Cities, that interlocks area-based 
development with digital assets and digital services. 
In the context of unique challenges, which only a country with a billion people can face, 
India’ s infrastructure journey has been global in outlook, but domestic in innovation and 
implementation.
343 Physical and Digital Infrastructure: Lifting Potential Growth
introduction
12.1 As India completes 75 years of Independence, the nation is evolving into a prominent 
force in the global economic order. India is the world’s fifth largest economy and the prospect of 
steady progress in the coming years is bright. Here, the critical role played by infrastructure in 
economic growth cannot be overemphasised. Investing in high-quality infrastructure
1
 is crucial 
for accelerating economic growth and sustaining it in the long run. As the empirical evidence 
states, this has a salutary effect on the productivity and efficiency of Indian manufacturing firms
2
. 
It further plays a significant role in poverty reduction
3
 and promotes both rural and agricultural 
development
4,5
. Empirical evidence also points to the positive effect of infrastructure towards 
bringing overall economic growth in India
6
. 
figure Xii.1: Quantity and quality of infrastructure and level of 
economic development across countries are strongly correlated
 
0
20000
40000
60000
80000
100000
100 600 1100 1600 2100
GDP per capita, current 
international $
Total infrastructure investment per 
capita, constant 2015 US$
Correlation: 0.75
0
20000
40000
60000
80000
100000
120000
1 3 5 7
GDP per capita, current 
international $
Quality of overall infrastructure
Correlation: 0.76
Note: The left graph pertains to 2019, and the right graph pertains to 2018.
Quality of overall infrastructure: 1=worst and 7=best.
Source: World Bank, Global Infrastructure Hub, and World Economic Forum Global Competitiveness Index
12.2 The above correlation between infrastructure and development brings us to the present 
scenario when during the times of pandemic and geo-political crisis, the government kept its 
focus on reforms in areas of physical, digital and regulatory infrastructure. In order to increase the 
private sector participation in creation of new infrastructure and development of existing ones, 
the government took initiatives like Public-Private Partnership (PPP), National Infrastructure 
Pipeline (NIP) and National Monetisation Pipeline (NMP). In addition to this, as part of the 
structural reforms with the objective to enhance efficiencies and cost competitiveness, Gati 
1
 In a broad sense, the term infrastructure refers to the “…physical facilities, institutions and organisational structures, or the social and eco-
nomic foundations, for the operation of a society” (World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge. 
United Nations Conference on Trade and Development.). The present chapter focuses only on emerging issues in the context of physical and 
digital infrastructure. Separate chapters of this survey provide in-depth views on social infrastructure and financial infrastructure related issues.
2
 Mitra, A., Varoudakis, A., & Véganzonès-Varoudakis, M. (2002). Productivity and Technical Efficiency in Indian States’ Manufacturing: The 
Role of Infrastructure. Economic Development and Cultural Change, 50(2), 395–426. DOI:10.1086/321916.
3
 Dutt, G. and Ravallion, M. (1998). Why have some Indian States Done Better than Others at Reducing Rural Poverty? Economica, 65: 17-38. 
https://doi.org/10.1111/1468-0335.00112
4
 Binswanger, H; Khandker, R. & Rosenzweig, M. (1993). How infrastructure and financial institutions affect agricultural output and invest-
ment in India, Journal of Development Economics, V olume 41, Issue 2, 1993, Pages 337-366, https://doi.org/10.1016/0304-3878(93)90062-R.
5
 Fan, S., Hazell, P. and Thorat, S. (2000). Government Spending, Growth and Poverty in Rural India. American Journal of Agricultural Eco-
nomics, 82: 1038-1051. https://doi.org/10.1111/0002-9092.00101.
6
 Sahoo, P. & Dash, R. (2009) Infrastructure development and economic growth in India, Journal of the Asia Pacific Economy, 14:4, 351-365, 
DOI:10.1080/13547860903169340
344 Economic Survey 2022-23
Shakti and National Logistics Policy (NLP) were also launched. This buffet of reforms on all 
aspects related to infrastructure investment and project execution not just ensures economic 
growth and economic efficiency but also generates confidence among various stakeholders in 
the economy towards government functioning.
12.3 Building upon it, the government has also kept its focus towards developing the traditional 
infrastructure like roads, railways, airports, ports, mass transport and waterways.  These play a 
vital role in national integration and regional development. The mechanisms like multi-modal 
transport system have also been put in place. The multi-modal connectivity will provide integrated 
and seamless connectivity for movement of people and goods from one mode of transport to 
another. It will facilitate the last mile connectivity and also reduce travel time for people, further 
reducing the logistics cost and promoting export competitiveness. These measures collectively 
can bring out the untapped potential of underutilised modes of infrastructure.
12.4 With increasing financialisation of the economy and penetration of digital services, growth 
in physical infrastructure alone could not be the answer for development. Though India's digital 
journey predates the pandemic, it would be rational to say that the testing times of the pandemic 
have accelerated its acceptance, application and coverage in many ways. The adaptability 
displayed by the citizens towards technology-driven changes was very encouraging. This 
confluence of digitisation and innovation acted as a game changer for India. 
12.5 Reflecting on the journey of digital infrastructure growth and its global adoption, it is 
pertinent to mention that in 2009, only 17 per cent of adults in India had bank accounts, 15 
per cent used digital payments, 1 in 25 had a unique ID document, and about 37 per cent had 
mobile phones. Today, these numbers have seen a meteoric rise — tele density has reached up 
to 93 per cent, over a billion people have a digital ID document, more than 80 per cent have 
bank accounts, and as of 2022, over 600 crore of digital payment transactions are completed per 
month. A Bank for International Settlements (BIS) working paper
7
 has estimated that progress 
towards financial inclusion, which would have taken almost half a century had India followed 
traditional growth processes, was achieved in India in just about ten years. 
12.6 Today, India is able to offer many best practices, particularly with respect to its digital 
infrastructure innovations, that can be emulated globally. Successful vaccination drive through 
the one-stop Co-WIN portal, DigiLocker, Open Network for Digital Commerce (ONDC), Open 
Credit Enablement Network (OCEN), Goods and Services Tax (GST) Sahay are a few success 
stories among many. The National Payments Corporation of India International (NPCIL) led 
Unified Payment Interface (UPI) is another such innovation which transformed the payment 
landscape. UPI based transactions grew both in value and volume terms, paving the way for its 
international adoption. 
12.7 Capitalising on the digital infrastructure support, India has also emerged as one of the 
world's most vibrant destinations for start-up ecosystems. Start-ups are being envisioned as the 
spine of new India, as they encourage the youth to become job creators rather than job seekers. 
With the highest FinTech adoption rate of 87 per cent among the public compared to the global 
average of 64 per cent, India has gained the 3rd place in digital payments
8
 only after US and 
7
 https://www.bis.org/publ/bppdf/bispap106.pdf, page 4.
8
 https://bfsi.economictimes.indiatimes.com/news/fintech/indias-fintech-market-size-at-31-billion-in-2021-third-largest-in-world 
report/88794336 BLinC per cent20report_Fintech_2022.pdf
Page 5


CHAPTER
12
The invention of the wheel set in motion the necessity of travelable paths, and since then 
the saga of infrastructure has expanded from canals to modern capital structures such as 
railways, roads etc. depending on the necessities of the region. In the last 75 years in India 
since Independence, infrastructure development has moved on a consistent growth curve 
building the assets required by the nation across sectors such as transportation, housing, 
commercial development, telecom and most recently, sanitation. As a key enabler of socio-
economic enhancement of a region, the government has used ‘social overhead capital’ 
to push development in the remotest areas of the country through dedicated budgetary 
allocation, cross-subsidising revenue-generating infrastructure and focussed programme 
delivery. This has helped in expanding physical transportation and connectivity, providing 
services at point-of-use and deepening digital penetration.
Infrastructure, being a melange of numerous sectors, its multiplier effects in the economy 
cannot be realised if it operates in silos. Thus, in 2019, Government of India adopted 
a forward-looking programmatic approach towards infrastructure. The National 
Infrastructure Pipeline was born with a projected investment of around ?111 lakh crore 
for FY20-25 for developing a comprehensive view of infrastructure development in 
the country, monitoring its progress at the highest levels in the government for timely 
completion, and enabling a pipeline view for investors for them to plan infrastructure 
investments. The funding for infrastructure comes from a variety of sources, from 
government to private sector to multilateral. However, given the quantum of funding 
involved, a creative financing option such as asset monetisation was also envisaged 
through the 5 lakh crore National Monetisation Pipeline. Apart from generating critical 
financial resources, private participation in running risk-free brownfield assets will also 
help in ushering in operational efficiencies and better management of public assets. 
The programmatic approach to infrastructure is complemented by structural and 
financial reforms such as infrastructure financing options of InvITs and REITs, creation of 
Dedicated Financing Institution (NaBFID), recapitalisation of other sectoral DFIs, push 
to PPP ecosystem through Model Concession Agreements by line ministries and enabling 
social infrastructure development through the revamped Viability Gap Funding scheme.
To bring in further convergence with comprehensive planning across centre and states, 
PM GatiShakti has sectoral complementarity of logistics facilitation through the National 
Logistics Policy launched in Sept 2022. All of this is expected to tighten the nuts and bolts 
for the arduous infrastructure journey that our country has undertaken together by the 
Physical and digital  
infrastructure: lifting 
Potential growth
342 Economic Survey 2022-23
participation of centre, state, local governments and the private sector.
This story has seen many successes. While roads, railways, and waterways have 
seen unprecedented expansion in the last eight years, ports and airports have been 
substantially upgraded. This has also helped the country move from unimodal to multi-
modal transportation, providing a window of opportunity to the private sector to invest 
and reinvest in these assets, which has already been facilitated by the policy of asset 
monetisation.  Extending infrastructural facilities is only part of the story; modernisation 
is the other important principle that has been attempted with verve and achieved with 
commendable speed.  
In keeping with the winds of change around the globe, we have placed a great emphasis 
on digital and communications development, but, have taken the principle to new heights 
in terms of usability, interoperability and accessibility. The country has come a long way 
from a time when a basic telephone connection was viewed as a luxury, to a stage where 
most individuals now have a mobile connection. It is not a hyperbole to state that with 
the thrust on Digital India, the story of digital infrastructure and services in India will 
always be seen by the world with a certain regard and appreciation. In a very short time, 
the country has seen a great multiplier effect on social and economic growth through 
the different uses of digital enablement led by the humble mobile phone and the Aadhar 
number– targeted beneficiary identification for various benefits, provision of healthcare 
and education services and financial inclusion.  Close on this, arrived the success story 
of India’s sui-generis payment infrastructure (UPI), which travelled internationally with 
select adoption and global acclaim. The bouquet of digital public infrastructure products 
like e-rupi,e-way bill, TReDS for MSMEs etc have ensured real value for money to 
consumers while reducing the compliance burden for producers.  And now, with the vision 
of $1 trillion digital economy by 2025, the government is marching towards providing 
more and more e-governance based services.
All of these developments are a testament to the fact that India has been one of the few 
countries where innovation in technology and digital connectivity has been and continues 
to be led by the public sector. The success of UPI, a common platform that serves as 
the backbone for diverse developments, has prompted government to task itself with 
another innovative attempt towards democratising digital commerce through the ONDC 
which could potentially transform how businesses and consumers interact at present. 
Empowering the end-users with control over their data is an essential ongoing task that 
is guided by the Account Aggregator framework. 
As the developments would indicate, the world has moved seamlessly from the focus 
on physical infrastructure to investing in digital infrastructure. Moving forward, it is 
almost a certainty that most of the future real-world applications are going to marry 
the two, something akin to that attempted under Smart Cities, that interlocks area-based 
development with digital assets and digital services. 
In the context of unique challenges, which only a country with a billion people can face, 
India’ s infrastructure journey has been global in outlook, but domestic in innovation and 
implementation.
343 Physical and Digital Infrastructure: Lifting Potential Growth
introduction
12.1 As India completes 75 years of Independence, the nation is evolving into a prominent 
force in the global economic order. India is the world’s fifth largest economy and the prospect of 
steady progress in the coming years is bright. Here, the critical role played by infrastructure in 
economic growth cannot be overemphasised. Investing in high-quality infrastructure
1
 is crucial 
for accelerating economic growth and sustaining it in the long run. As the empirical evidence 
states, this has a salutary effect on the productivity and efficiency of Indian manufacturing firms
2
. 
It further plays a significant role in poverty reduction
3
 and promotes both rural and agricultural 
development
4,5
. Empirical evidence also points to the positive effect of infrastructure towards 
bringing overall economic growth in India
6
. 
figure Xii.1: Quantity and quality of infrastructure and level of 
economic development across countries are strongly correlated
 
0
20000
40000
60000
80000
100000
100 600 1100 1600 2100
GDP per capita, current 
international $
Total infrastructure investment per 
capita, constant 2015 US$
Correlation: 0.75
0
20000
40000
60000
80000
100000
120000
1 3 5 7
GDP per capita, current 
international $
Quality of overall infrastructure
Correlation: 0.76
Note: The left graph pertains to 2019, and the right graph pertains to 2018.
Quality of overall infrastructure: 1=worst and 7=best.
Source: World Bank, Global Infrastructure Hub, and World Economic Forum Global Competitiveness Index
12.2 The above correlation between infrastructure and development brings us to the present 
scenario when during the times of pandemic and geo-political crisis, the government kept its 
focus on reforms in areas of physical, digital and regulatory infrastructure. In order to increase the 
private sector participation in creation of new infrastructure and development of existing ones, 
the government took initiatives like Public-Private Partnership (PPP), National Infrastructure 
Pipeline (NIP) and National Monetisation Pipeline (NMP). In addition to this, as part of the 
structural reforms with the objective to enhance efficiencies and cost competitiveness, Gati 
1
 In a broad sense, the term infrastructure refers to the “…physical facilities, institutions and organisational structures, or the social and eco-
nomic foundations, for the operation of a society” (World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge. 
United Nations Conference on Trade and Development.). The present chapter focuses only on emerging issues in the context of physical and 
digital infrastructure. Separate chapters of this survey provide in-depth views on social infrastructure and financial infrastructure related issues.
2
 Mitra, A., Varoudakis, A., & Véganzonès-Varoudakis, M. (2002). Productivity and Technical Efficiency in Indian States’ Manufacturing: The 
Role of Infrastructure. Economic Development and Cultural Change, 50(2), 395–426. DOI:10.1086/321916.
3
 Dutt, G. and Ravallion, M. (1998). Why have some Indian States Done Better than Others at Reducing Rural Poverty? Economica, 65: 17-38. 
https://doi.org/10.1111/1468-0335.00112
4
 Binswanger, H; Khandker, R. & Rosenzweig, M. (1993). How infrastructure and financial institutions affect agricultural output and invest-
ment in India, Journal of Development Economics, V olume 41, Issue 2, 1993, Pages 337-366, https://doi.org/10.1016/0304-3878(93)90062-R.
5
 Fan, S., Hazell, P. and Thorat, S. (2000). Government Spending, Growth and Poverty in Rural India. American Journal of Agricultural Eco-
nomics, 82: 1038-1051. https://doi.org/10.1111/0002-9092.00101.
6
 Sahoo, P. & Dash, R. (2009) Infrastructure development and economic growth in India, Journal of the Asia Pacific Economy, 14:4, 351-365, 
DOI:10.1080/13547860903169340
344 Economic Survey 2022-23
Shakti and National Logistics Policy (NLP) were also launched. This buffet of reforms on all 
aspects related to infrastructure investment and project execution not just ensures economic 
growth and economic efficiency but also generates confidence among various stakeholders in 
the economy towards government functioning.
12.3 Building upon it, the government has also kept its focus towards developing the traditional 
infrastructure like roads, railways, airports, ports, mass transport and waterways.  These play a 
vital role in national integration and regional development. The mechanisms like multi-modal 
transport system have also been put in place. The multi-modal connectivity will provide integrated 
and seamless connectivity for movement of people and goods from one mode of transport to 
another. It will facilitate the last mile connectivity and also reduce travel time for people, further 
reducing the logistics cost and promoting export competitiveness. These measures collectively 
can bring out the untapped potential of underutilised modes of infrastructure.
12.4 With increasing financialisation of the economy and penetration of digital services, growth 
in physical infrastructure alone could not be the answer for development. Though India's digital 
journey predates the pandemic, it would be rational to say that the testing times of the pandemic 
have accelerated its acceptance, application and coverage in many ways. The adaptability 
displayed by the citizens towards technology-driven changes was very encouraging. This 
confluence of digitisation and innovation acted as a game changer for India. 
12.5 Reflecting on the journey of digital infrastructure growth and its global adoption, it is 
pertinent to mention that in 2009, only 17 per cent of adults in India had bank accounts, 15 
per cent used digital payments, 1 in 25 had a unique ID document, and about 37 per cent had 
mobile phones. Today, these numbers have seen a meteoric rise — tele density has reached up 
to 93 per cent, over a billion people have a digital ID document, more than 80 per cent have 
bank accounts, and as of 2022, over 600 crore of digital payment transactions are completed per 
month. A Bank for International Settlements (BIS) working paper
7
 has estimated that progress 
towards financial inclusion, which would have taken almost half a century had India followed 
traditional growth processes, was achieved in India in just about ten years. 
12.6 Today, India is able to offer many best practices, particularly with respect to its digital 
infrastructure innovations, that can be emulated globally. Successful vaccination drive through 
the one-stop Co-WIN portal, DigiLocker, Open Network for Digital Commerce (ONDC), Open 
Credit Enablement Network (OCEN), Goods and Services Tax (GST) Sahay are a few success 
stories among many. The National Payments Corporation of India International (NPCIL) led 
Unified Payment Interface (UPI) is another such innovation which transformed the payment 
landscape. UPI based transactions grew both in value and volume terms, paving the way for its 
international adoption. 
12.7 Capitalising on the digital infrastructure support, India has also emerged as one of the 
world's most vibrant destinations for start-up ecosystems. Start-ups are being envisioned as the 
spine of new India, as they encourage the youth to become job creators rather than job seekers. 
With the highest FinTech adoption rate of 87 per cent among the public compared to the global 
average of 64 per cent, India has gained the 3rd place in digital payments
8
 only after US and 
7
 https://www.bis.org/publ/bppdf/bispap106.pdf, page 4.
8
 https://bfsi.economictimes.indiatimes.com/news/fintech/indias-fintech-market-size-at-31-billion-in-2021-third-largest-in-world 
report/88794336 BLinC per cent20report_Fintech_2022.pdf
345 Physical and Digital Infrastructure: Lifting Potential Growth
China, signifying that India has an untapped market. These untapped opportunities, along with the 
favourable ecosystem, creates a large growth potential for FinTechs in India.  Taking this vision 
forward, under the government's policy initiative, a world-class FinTech Hub at Gujarat International 
Finance Tec-City (GIFT) International Financial Services Centre (IFSC) has been developed.
12.8 This is just an illustration of the opportunities that exist. The massive wave of digitisation, 
increased penetration of smartphones, and adoption of technology have opened the doors for 
both traditional and new-age sectors. The rollout of 5G services can unleash new economic 
opportunities and help the country leapfrog the traditional barriers to development, spur 
innovations by start-ups and business enterprises, and advance the 'Digital India' vision. The 
journey is far from complete, and a lot remains to be accomplished to realise our true potential. 
12.9 To summarise, this chapter covers the recent and past experiences of the government in 
transforming and inter-locking the potential of physical, regulatory and digital infrastructure. 
In doing so, the chapter looks to answer the following: How have the various infrastructural 
sectors fared after the Covid-19 shock? How has the government leveraged digital technologies 
in the service of the public? How far has the government been able to determine the role of  
co-ordination and efficiency in infrastructure projects and what is the government’s vision 
towards infrastructure development? In doing so, we will cover the government’s plans to place 
India among the top three global economies and inch closer to the status of a developed nation 
by the 100th year of its Independence. 
government’s Vision and approaches to infrastructure development in india
12.10 Increase in infrastructure investment provides a critical push to the potential growth of 
the economy. The government, in recent years, provided an increased impetus for infrastructure 
development and investment through the enhancement of capital expenditure. This push has 
happened at a time of crisis when the capital expenditure by the private sector has been subdued. 
The outlay (target) for capital expenditure in 2022-23 (BE) was increased sharply by 35.4 per cent 
from ? 5.5 lakh crore in the previous year (2021-22) to ? 7.5 lakh crore, of which approximately 
67 per cent has been spent from April to December 2022. 
figure Xii.2: central government has sharply increased capital 
expenditure in the last two consecutive years*
 
3.4
4.1
5.5
7.5
13%
22%
34%
35%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
FY20 FY21 FY22 FY23
growth (per cent)
Capital expenditure (? Lakh Crore)
GBS YoY growth in Capex
   * All figures are representative of Budgeted Estimates for the respective Financial Year
   Source: Union Budget of India