Term 1 Report: Infrastructure Impact on Trade and Economic Growth

This report investigates the significant impact of infrastructure on trade and economic growth, focusing on the case of India within the context of a Global MBA program. It begins with an introduction outlining the background, research aims, objectives, and rationale, emphasizing the importance of infrastructure development in boosting economic growth, particularly in the face of global economic challenges like the COVID-19 pandemic. The literature review explores existing research on the relationship between infrastructure, trade, and economic growth. The methodology chapter describes the research approach, followed by data analysis, discussion of findings, and conclusions. The report examines how infrastructure improvements, such as road and rail networks, influence trade costs, facilitate international market access, and promote economic expansion, considering the role of government policies and strategies. The study also addresses the impact of infrastructure on trade, exploring the significance of infrastructure for small and medium-sized enterprises (SMEs) and the role of government policies. The report concludes with recommendations for enhancing infrastructure to foster trade and economic growth in India.

Impact of infrastructure on
trade and economic growth
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Table of Contents
CHAPTER 1 INTRODUCTION.....................................................................................................3
CHAPTER 2 LIITERATURE REVIEW.........................................................................................7
CHAPTER 3 RESEARCH METHODOLOGY............................................................................16
CHAPTER 4 DATA ANALYSIS.................................................................................................23
CHAPTER 5 DISCUSSION..........................................................................................................33
CHAPTER 6 CONCLUSION AND RECOMMENDATIONS....................................................36
REFERENCES..............................................................................................................................40
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CHAPTER 1 INTRODUCTION
Background
In present times, there has been high decline in global economy due to Covid 19. the
pandemic has highly impacted on economic growth of both developed and developing nation.
along with it, there is decline in GDP of countries as well. In survey done by various rating
agency like Moddy’s, fitch, etc. it is estimated that there will be decline of 2-5% in global
economy. moreover, there will be negative impact on trade as well between countries. It is found
that pandemic has impacted Europe and US to a great extent as compared to other nations.
Therefore, it is important for all countries to maintain economic growth. Basically, there are
several ways to boost economy such as bringing in financial policy, trade with other nation, etc.
there is a significant role of infrastructure in economic growth. It reflects entire road, rail
network, buildings, urban and rural development etc. (Maparu and Mazumder, 2017). With
improvement in infrastructure it becomes easy to develop rural areas. Also, it helps in
strengthening network of transport and connecting rural and urban areas. Every nation focuses on
improving its infrastructure so that their economic growth is increased. Moreover, they do trade
with other countries in terms of import and export. Thus, if trade increases it leads to economic
growth. However, when trade increases it leads to infrastructure development. this is because it
allows companies to invest in within nation. basically, large and SME are back bone of economic
growth. The products manufactured are exported to other countries and trade is done. it has been
analysed that every country trade and infrastructure are interrelated to one another. the
infrastructure plays vital role in promoting trade and economic growth. The nations who are
developed in having strong infra and trade policy due to which they are able to deal with other
countries. also, they export many types of products to other countries. Furthermore, infra helps in
reducing trade costs and rising volume of it. so, with quality infra there is rise in trade. there are
several reforms of trade which is applied. It allows in facilitating trade and removing barriers in
it. There are many categories in infrastructure that are port, physical, road, etc which help in
movement of goods from one place to another.
The government develops several strategies in order to boost economic growth. this is
done to attract foreign direct investment. Furthermore, exports are increased and import is
reduced. This results in increase in trade and reducing foreign exchange deficit. Besides that,
many other measures are taken to ensure economic growth is maintained. India is a developing
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country located in Asia (Agrawal, 2015). The nation is having a potential of high economic
growth. it is because they possess resources and talent as well which can led to attain growth rate
of 9- 10 % in next 1-2 years. there is also a high impact of covid 19 on country. due to it,
economic growth is affected. However, nation highly depends on imports for fulfilling their
needs and resources. besides that, exports is less as compared to imports. alongside, nation
infrastructure and trade needs to be boosted so that economic growth is improved. In addition,
India is having strong international relation with many countries. thus, they can easily grab
opportunity to increase growth. the government can attract FDI from other countries. Also, new
trade policy can be formed and tariffs are changed. It will be useful in boosting growth and
emerging of new opportunity for business to trade with countries in free way. The gravity model
to used to analyze the effect of infrastructure on the volume of trade by its influence on transport
costs. thus, it was found that infra had a vital and positive relationship with volume of trade. As a
result, difference in transport costs among economies may highlight differences in their ability to
compete in international markets (Bajar, and Rajeev, 2016). Furthermore, difference in the
volume and quality of infra may account for differences in transport costs. Hence, better
transport services and infra improve international market access and increase trade. It allows
nation to trade at global level with maximum capacity. there is rise in foreign reserve in nation.
many companies start setting up their unit in country and offering job to people. On contrary if
infra is not good then it impacts on trade and economic growth in negative way. this is because
there is no network of road and rail transport, so business find it tough to transfer products from
one place to another. therefore, business does not prefer to trade with those nation. this results in
affecting on economic growth as well. Similarly, if policy formed in not proper then it act as
barrier in trade.
It has been studied that infrastructure has quite tremendous impact on economic growth.
It has been stated that 1% increase in investment leads to 2- 3 % economic growth. Infrastructure
includes road development There are several direct impacts on trade and economic growth. Due
to the road construction, trade can be largely increased. Products can be transported from even
remote areas through air transport where road and rail connection is difficult. Small scale and
Cottage scale industries can become the part of backbone of economy as the specialized goods
can be exported and revenue can be increased and foreign exchange deficit can be reduced.
Research aims and objective
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Aim –
To analyse impact of infrastructure on trade and economic growth. A case study on India.
Objectives
 To investigate how infrastructure impacts trade and economic growth.
 to evaluate push and pull strategies for the government institutions.
 to analyse benefit of infrastructure development in economic growth
Research questions
 It is to be identified in the literature how infrastructure impacts trade and economic
growth.
 The research would aim to focus on big push and big pull strategies for the government
institutions.
 The research would help the government institutions to observe the insights of benefits
on infrastructure development
Rationale
In such a difficult time due to pandemic of covid 19 the entire global economy is
adversely affected. It has led to bringing crises in many nations.
The reason for doing this study is that due to covid 19 economic growth of India and
entire world is highly affected. so, with this there is affect on trade as well. However, developed
economies is affected also. the health and other infra of nation is impacted. thus, there is affect
on trade as well. with this research it will be easy to find out impact on infra of trade and
economic growth. Along with it, it is determined that how pull and push strategies affect on trade
and economic growth. Hence, it will be easy to relate those strategies with trade and
infrastructure.
Besides that, purpose of study is to identify that how government institutions gave insight
of benefits on development of infra. Therefore, data and info of it is evaluated and how it related
with trade and economic growth of nation. Furthermore, it is determined that how investment
made by government impact on economy and how it brings in trade.
Significance
There is a great significance of doing this research. this is because it will help in
analysing how trade and infra affect on economic growth. Through it, factors will be identified
which play a vital role in it. Moreover, study will provide in depth data and info about factors,
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role of government, trade policy etc. that impact on trade. In addition, it will explain about two
theories that are pull and push strategies and how it differs from government and economic
growth of nation. Hence, study will provide information about various pull and push strategies
which can be taken by government in order to increase economic growth.
Structure
It shows the entire structure of study along with its different chapters. They are discussed
in a systematic way which makes it simple for user to understand each chapter in a proper
manner. Also, it is easy to evaluate what is included in each chapter.
Chapter 1 Introduction – This is the first chapter which will give an overview of overall
research topic. In that, scholar will describe rationale, aim, objectives, research questions, etc.
that have to be achieved (Khurana and et.al., 2018).
Chapter 2 Literature review- It is the second chapter in which researcher will analyze
secondary data from different research articles, journals, etc. Here, the topic is discussed in depth
regarding what other authors have contributed in past. The secondary data is collected and
analyzed which makes it easy for user to know what subject is all about.
Chapter 3 Research methodology – It will describe about different types of research methods
which will be used or applied by the researcher in project. It will give an overview about how
overall research will be conducted and what methods are used.
Chapter 4 Data analysis – It will show how primary data is collected and interpreted. It gives a
brief analysis of results obtained from data. It will include graphs, tables, charts, etc. along with
its interpretation.
Chapter 5 Discussion and analysis- In this, the results and analysis are discussed which will
show findings of overall research. The researcher will give an in-depth analysis of data and
information interpreted by collecting primary one. This will make it easy for the user to evaluate
overall findings of project.
Chapter 6 Conclusion – It is the last chapter in which conclusion is done. Here, researcher
shows what is concluded after completing the project. This chapter gives an insight that about
findings of data and information.
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CHAPTER 2 LIITERATURE REVIEW
Literature review is referred to as a comprehensive summary of already collected set of
data associated with the specific research topic. The literature review is useful in serving
scholarly articles, books, journals for a particular area of research. The literature review is
prominent because it helps in enumerating, summarizing, describing and also clarifying the
specific research associated with the subject matter. Literature review helps in bridging the gap
and knowledge of the researcher because it helps in providing a foundation of knowledge
associated with the research topic. It is very useful in identifying key areas of prior scholarship in
order to prevent duplication of the data and examining gaps, conflict associated with the previous
studies.
Theme 1 infrastructure impacts trade and economic growth
As said by Bajar, and Rajeev, (2016) a nation economic growth predict its development
status. it means that it is identified whether country is developed, developing or under developed.
It states that whose nation economic growth is high it is considered as developed and who’s in
low is under developed. Thus, for every government it is their top priority to maintain growth so
that they are developed. For that they put huge efforts to ensure that economy is maintained.
Along with it, there is direct relationship of infra and trade on economic growth. This is because
when trade increases it leads to rise in economy but on contrary if trade decreases economic
growth is declined. In similar way, trade results to improvement in infra and increase in
investment in it. thus, there is increase in growth as well. Alongside, trade only raises when there
is strong network of infra within a nation. This is because it is useful in movement of goods and
services from one to another in effective way. The companies are able to invest in those nation
by setting up their industry. it results in providing employment, bringing FDI, technology etc.
According to Haque, (2016) trade does not include investing in businesses in other
countries but it also consists of import and export of goods and services between nations. so,
when export is higher than import it led to rise in economic growth. this is because it raises
foreign exchange reserve. Apart from it, there is decrease in cost of trade. However, it is
evaluated that good and strong infra attract companies to invest in countries. It is because they
bring in new opportunity and development. The government is able to generate revenue from
them by obtaining tax. in addition, more business is brought by them.
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Reddy, and Reddy, (2015) sought to determine the fact that, Low degree of infrastructure
quality and quantity tends to result in trade restrictions and also increase the transportation cost.
Infrastructure times to play one of the key significant role which helps in facilitating trade and
visit Asia which has resulted in reduction in tariff rates. Improvement within the transportation
infrastructure such as road density network, railway network, ports, logistics system, air transport
is very useful in increasing the trade flows. Use of information and communication technology
infrastructure is one of the key significant method which has in enhancing trade and also increase
the number of telephone lines, broadband access, mobile phones, secure internet servers, internet
users have positive trade effects for both importers and exporters within Asia. In the short span
of time, upgrading and building up of Energy and transport networks helps in boosting up the
employment, construction activity which eventually needs to growth within the economy. For the
long span of time, infrastructure investment is very useful in boosting up economic growth by
effectively increasing the potential supply and capacity of the economy. Increase in
infrastructure spending will also result in rise in the gross domestic product of the economy.
Increase in the infrastructure helps in significantly boosting up the economic activity and also
leads to high employment growth. Agrawal, (2015) sought to argue on the fact that,
Infrastructure development is highly crucial for the economic growth because it helps in
elevating poverty from the country and it also helps in increasing the job opportunities for the
people. The adequate infrastructure in the form of railway and road transportation system, power,
airports, ports, etc. helps in increasing the economy. The adequate set of infrastructure and
building is useful for the attainment of better economic growth and development. One of the key
significant reason for poor infrastructure development within the economy is mainly linked with
political influence, Poor accountability, corruption, in a fish and sea of labour force, less political
concern, absence of incentives, et cetera leads to poor infrastructure within the economy. Lack of
infrastructure needs to deficit within the economy and poor standard of living among the
individuals. At present times, worldwide economic growth is declined due to pandemic of covid
19. The poor infrastructure leads to lower employment opportunities and affect the income level
of the people. Poor infrastructure tends to have negative effect on the poverty and affect the
economy adversely.
Maparu and Mazumder, (2017) sought to determine the fact that, Infrastructure helps in
improving the trade because it is useful in the movement of the goods and services from one
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nation to another which helps in reducing the cost associated with the trade and also helps in
improving the outcomes and results. There seems to be significant level of border effects on the
regional price levels which tends to indicate and demonstrate that, there seems to be high degree
of better regional infrastructure which leads to higher operational growth and sustainability.
Improving the infrastructure and building up the telecommunication network is of utmost
accuracy which helps in providing better set of networks and improving the infrastructure of the
country. Bajar, and Rajeev, (2016) argued that, there are various types of infrastructure like
transportation, water energy, public space, health and education, safety and resilience, finance,
etc., helps in boosting up the economy level. Deterioration within the infrastructure tends to have
high degree of public safety issues and also tends to have cascading effect on the nation's
economy. The poor infrastructure negatively affects the productivity of the business, low degree
of employment opportunities, international competitiveness, gross domestic product, personal
income, etc. Lack of infrastructure tends to bring poor standard of living and economic deficit.
The infrastructure damage also leads to high degree of poverty within the economy and it tends
to affect the social as well as the economic sector because of lower infrastructure. Ineffective
poor infrastructure results in not selling of the goods and services to the poor. Moreover,
ineffective transport infrastructure directly leads to higher cost of transportation which also
results in long time of delivery.
Haque, (2016) sought to determine the fact that, improved infrastructure is significant in
providing logistic services which helps in reducing the cost of transportation which leads to
improved international trade and also tends to have effective set of infrastructure services. In the
long run, infrastructure is highly significant because it helps in boosting up the economy because
it leads to increasing growth and also improve the potential supply capacity of the economy.
Improving the transportation facilities is very useful in effectively making the workers more
mobile and effectively improving the labor markets. This way it helps in efficiently increasing
the productivity levels and is useful in improving the flow of the international trade. This
eventually leads to improved set of import and export facilities which helps in improving the
growth of the economy. Geographical and market factors which is useful in determining the cost
associated with the transport. High degree of investment within the infrastructure tends to
influence the overall level of the economy which tends to negatively influence the productivity
slack of the economy. It is highly impossible to effectively and reliably forecast on the various
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set of long term effect in order to improve the overall economic level of the individual.
Infrastructure investment is highly significant because it leads to boosting up the productivity
growth of the economy. Infrastructure improvement also helps in boosting up the economic
activity and also leads to better employment levels. Effectively combining the building energy
efficiency is very useful because it tends to have smarter grid for the carbon mitigation.
However, infrastructure improvement is useful because it tends to have multiplier effect on the
growth and productivity of the economy.
Theme 2 push and pull strategies for the government institutions
Maparu and Mazumder, (2017) sought to determine the fact that, push strategy is one of
the most effective strategy which helps in attempting to effectively improving the outcomes of
the person. Push strategy is effectively used in order to gain high degree of exposure to the
product. Moreover, employment rate is again one of the key performance indicators related with
the economic growth. It has been evaluated that, with the increase in employment the purchasing
power parity also increases. It also leads to tax revenues increase and higher economic growth
with increase in investment and cycle recurrences.
Aditya, Douglass and Bhattacharya, (2017) sought to argue on the fact that, there are
important theories will be part of this research i.e., big push and big pull strategies where in
former one government invests in infrastructure in order to effectively reduce the average cost.
This way it helps companies in generating more revenues and leads to higher economic growth.
The later government wait until average budget of the business sector has raised and then they
invest in infrastructure in order to reduce the average budget and rise the revenues and economic
growth. At the time of infrastructure development, the government tends to hire contractors and
service, which tends to increase employment and also leads to country’s development. Kaur,
Khatua, and Yadav, (2016) sought to determine the fact that, investment from other foreign
companies tend to rise with good infrastructure. However, big economies tends to have finely
built infrastructure and it helps in attracting the companies from across globe which leads to
growth within the economy. Effective communication, feasible transportation modes,
uninterrupted power supply, etc. are some of the key components of good infrastructure which
tends to attract investors worldwide and thus business sector tends to grow inevitably. The
government must mainly focus on effectively improving the areas which is useful in positioning
the economy in order to effectively improve the infrastructure.
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Aditya, Douglass and Bhattacharya, (2017) sought to argue on the fact that, use of
effective distributed model is useful for the infrastructure project. Empowering the state and the
local government is one of the key effective strategy which helps in the attainment of the goals
and objectives by the government institution. Revamping the highway trust is one of the key
prominent strategy which helps the government institution in improving the infrastructure of the
economy. Agrawal, (2015) sought to argue on the fact that, progress within the infrastructure of
the India is one of the most significant phenomena which largely affects the development of the
economy. It is very useful to identify where the government is needed and the areas which needs
adequate support for improvement. Making smart bridges within the country is very useful in
better connectivity and leads to higher sustainable growth and efficiency. Increasing access to the
open areas for rural people helps in facilitating the transportation of goods and it also has a
serving as an interstate bridge for the energy, freight and agricultural industry.
Kaur, Khatua, and Yadav, (2016) sought to determine the fact that, establishment of the
port is considered to be as one of the most significant economic activity which in turn has been
carried out within the coastal area. The more infrastructure, associated services and provisions in
turn are highly required which impose high degree of valuable benefit to the economy. This is
highly beneficial in providing support for carrying out effective set of connection in order to
improve the trade across the country and helps in the high degree of economic development.
India is considered to be as a good rich heritage which trades across the sea. Improvement within
the structure leads to high degree of throughput of the passengers and goods. The efficient
management of the ports tends to lead to high degree of throughput of the goods and also
passengers from across various territories and countries. This way it is useful in providing high
degree of management information which is useful for attaining of better advantages to the
economy. Improvement within the infrastructure eventually leads to increase the employment
opportunities which is beneficial in increasing the development of the economy and various
others services which leads to higher economic growth.
Maparu and Mazumder, (2017) sought to determine the fact that, the government needs
to effectively focus on monitoring the economic growth with the use of fiscal and monetary
policy. This policy is considered to be useful in improving the long term growth which tends to
largely stimulate the economic growth. The government institution must highly focus on
enacting the monetary policy, effectively fixing the exchange rate and also controlling the age
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and price. The government institution complying with the effective economic strategy is
considered to be relatively rapid and new which is useful in developing the key areas of the
economy which needs improvement. The government institution must highly comply with the
infrastructure development strategies which leads to high degree of inclusive growth to the
people. The government must focus on taking measures to develop rural areas, better urban
infrastructure development and alleviation of the poverty. This strategy is highly useful because
it helps in the better attainment of the economic growth and development. The government
institution must focus on providing integrated transport system, air traffic, power, energy,
education sector and telecommunication is considered to be highly beneficial for the inclusive
growth of the economy. Bajar, and Rajeev, (2016) sought to argue on the fact that, the
government institution must effectively focus on improving the infrastructure decision of the
economy by effectively creating an appropriate set of infrastructure strategy for the specific
country. Improving the way the government uses cost benefit analysis which is useful in
developing evidence for the finance option. This is useful in establishing a commission for the
public engagement which mainly includes local communities in various infrastructure project.
Improvement within the infrastructure development is considered to be highly significant
because it helps in improving the economic condition by reducing the poverty rates and
increasing the employment rates within the economy.
Theme 3: Benefit of infrastructure development in economic growth
Khurana and et.al., (2018) sought to determine the fact that, Economic infrastructure is
very useful in ensuring the mobility of labour and capital within the economy. Economic
infrastructure is very useful for the overall growth of the cities and towns. Infrastructure
development leads to growth within the economy that was it helps in generating employment
opportunities which leads to better living standards and higher growth opportunities for the
people within the economy. The infrastructure is useful for higher degree of economic growth
and also has an elevating the poverty within the economy. Adequate form of infrastructure in the
form of effective railway transport system, Road transport, ports, airports, power, etc. in order to
improve the working efficiency of the individual people. Rural poverty is one of the effective
measure which hinders the mobility and development of the infrastructure within the economy.
Lack of infrastructure in turn leads to deficit within the economy and leads to poor selling output
in the market because of ineffective infrastructure facility within the economy.
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