Introduction

The positive effect of infrastructure on agricultural development has been articulated theoretically in several studies (Ruttan, 1984; Mellor 1976) and substantiated empirically by many (Barns and Binswanger, 1986; Binswanger et al., 1989; Fan et al., 1999; Narayanamoorthy and Hanjra, 2006). Agricultural output growth is determined largely by technology and prices, in combination with agricultural infrastructure such as roads, irrigation, market and credit facilities. Theoretically, the production surface shifts upwards with the introduction of infrastructure as a variable in the production frontier estimation. Given the critical role of infrastructural facilities in agricultural growth, the Indian government has accorded high priority to its development since the beginning of planning in the country. Elaborating its pattern of priorities, the First Five Year Plan held that, ‘For the immediate five year period, agriculture, including irrigation and power, must in our view have the topmost priority…. The state in this initial period has to concentrate on the provision of basic services like power and transportation’. In subsequent plans as well, stress was laid on building a meaningful infrastructural network and providing basic services for the development of a modern economy.

The provision of infrastructure facilities remained almost exclusively a domain of the state till the early 90s, as, owing to the long gestation period of infrastructural projects and their generally low profitability, private capital was not envisaged to flow into this area. However, tight fiscal conditions in the 1990s, coupled with emerging concerns regarding the need to provide efficient infrastructure services in a globally competitive set-up and rethinking on the ability of government owned entities to supply ‘quality’ infrastructure, led to a perceptible shift in the government's approach towards infrastructural development.