8.4.1 There does not exist any official infrastructure index at the moment. However, there is a felt need for such an index and the creation of such an index may be an important input to policy-making as well as research. Thus apart from detailed data collection from a research and planning perspective, it may be useful to devise a summary measure of the state of infrastructure in the country. It is in this context that two types of indices are being proposed. The first index will provide a summary measure of the growth of infrastructure in the country. A comparison of the behaviour of this index with other aspects of the economy will yield insights into the gaps and lacunae that have emerged or are likely to emerge in the Infrastructure Sector. The second index being proposed is an utilisation index.
Infrastructure Index
8.4.2 The following items, only illustrative in nature, are being proposed for inclusion in the infrastructure index, the details of which are given in Annexe 8.2. The choice of items is governed by their correlation with productive activity. It is recognised that not all the items will have a strong correlation with productive activity. Thus it may be argued that the length of railway tracks will be more highly correlated with production than would be the signaling system or number of stations. This is not to deny that these items are important components of the railway facility. The point being made is that the categories to be included in the proposed index should exhibit co-movements with productive activity. These are:
Length of railway tracks
Length of roads (of appropriate quality)
Length of runaways
Number of berths at ports
Number of telephone connections
Transmission of electricity: length of cables
Generation of electricity.
8.4.3 The creation of an index of the illustrative items listed above will require weights to be attached to each of the components. Once these weights have been determined the index may be computed by aggregating over the components. Annexe 8.2 gives details of the proposed approach to deriving weights.
8.4.4 As is usual, in the creation of an index, the Infrastructure Index will be normalised to equal 100 in the base year.
8.4.5 Depending on the components of the infrastructure, it will be possible to use the index number in a variety of ways. For instance, focusing on the transport sector will lead to an index number only in terms of the following illustrative components: Length of railway tracks; Length of roads (of appropriate quality); Length of runaways; Number of berths at ports.
Infrastructure Utilisation Index
8.4.6 Depending on the theoretical position taken, one could argue that the creation of infrastructure capacity should take place in response to pressures coming from productive activities or, alternatively, creation of infrastructure capacity should precede any demands that may be placed on it. Whatever be the position taken, it is necessary from an empirical point of view to determine whether there is (a) slack in the utilisation of infrastructure facilities, or (b) congestion or shortages in the utilisation of infrastructure, or (c) optimal utilisation of infrastructure. The Infrastructure Utilisation Index is being proposed to precisely help in answering such questions.
8.4.7 It is obvious that any utilisation index will have to set up norms for the maximum permissible utilisation of an infrastructure facility. For instance, in the case of railway tracks there is, allowing for abundant safety, a maximum number of trains that can run per time period (say, a day). Any increase above this maximum will indicate critical shortages and a severe compromise on safety standards; a substantial gap between the maximum and actual utilisation will be indicative of a slack.
8.4.8 It will be necessary to determine the maximum permissible utilisation rate for each and every infrastructure facility that enters into the index. Expert engineering advice on this aspect will be necessary. Once the maximum rate has been determined the task of creating an index may be undertaken. The details for this index are given in Annexe 8.2. The maximum value of this index will be normalised to equal 100. The actual value of the index for any year will indicate the level of utilisation of the selected infrastructure facilities.
8.4.9 The coverage of this index will have to be determined very carefully. For instance, on some routes of the railways, such as Mumbai–Pune, the density of traffic may be so high as to yield a high utilisation rate. However, on certain other segments where density is not high the rate of utilisation may be much lower. A view will have to be taken by an expert committee regarding the exact scope and coverage of this index.
Conclusions and Recommendations
8.4.10 There is no doubt that the infrastructure indices will play a useful role in determining the availability of infrastructure in India as well as its utilisation. It is, therefore, suggested that two infrastructure indices be created, one a general index and the other a utilisation index. In order to determine the weighting pattern as well as the coverage and scope of the indices, a Special Committee should be set up by the Ministry of Statistics and Programme Implementation (MoS&PI) to look into the matter. Before the Committee can start its deliberations, a complete valuation of the capital stock in infrastructure activities may be undertaken. Other suggestions that may be implemented over a longer period are:
Increasing the scope of the infrastructure index: It is likely that, initially, the coverage of infrastructure facilities to be included in the Index may have to be modest. There may be arguments for initially including only those facilities in the Index as are closely correlated with productive activities. However, as experience with respect to computation of the Index is accumulated it would be possible to expand its scope.
Updating the base year of the indices, possible every 5 years: One of the major lacunae present for indices in India has been the lack of frequent revision of the base year. This tardiness is also likely to affect the indices proposed here unless special efforts are made to overcome this gap. The weighting pattern suggested for the Infrastructure Index depends on the share of each facility in the infrastructure capital stock in the country. This is likely to undergo substantial change as investment in infrastructure picks up in the country. Hence it is important that the weighting pattern be revised every five years so that the index is representative of the actual state of affairs in this Sector.
8.4.11 The above activities have been placed under long-term recommendations in view of the fact that a learning process may be involved in the process of data collection as well in the construction of the index. Thus the Commission recommends that:
For devising a summary measure of the state of infrastructure in the country, two suggested infrastructure indices – one being a general index and the other an utilisation index – should be constructed by the MoS&PI. A Special Committee should be set up by the MoS&PI to look into the details of construction of these indices.
Although coverage of infrastructure facilities to be included in the indices may be modest in the initial stage, its scope should be widened in a gradual manner.
The weighting pattern of the indices should be revised every five years so that the indices are representative of the actual state of affairs in the Sector.
