Effectiveness of Public Private Partnership in Infrastructure Development in India: A Review

Abstract

Indian economy is growing at a very fast pace and it has a dynamic and robust financial system. A stable policy
environment is ensured by its democratic status and its independent institutions guarantee the rule of law. The most
significant criteria for a continued growth rate of an economy are the provision of a quality infrastructure. According to the
Planning Commission, an approximation of 8 percent of the Gross Domestic Product needs to be invested. Up gradation of
transport (roads, railways, airports, and ports), power, and urban infrastructure is therefore seen as critical for sustaining
India’s economic growth, along with improved quality of life, increase in employment opportunities, and progress towards
the elimination of poverty. PPPs aim to combine the skills, expertise, and experience of both the public and private sectors to
deliver higher standard of services to customers or citizens. When infrastructure is developed as PPPs the process is often
characterized by detailed risk and cost appraisal, complex and long bidding procedures, difficult stakeholder management,
and long-drawn negotiations to financial closure. This means that PPPs are critically dependent on sustained and explicit
support of the sponsoring government. Current status of PPP projects in financial years from 2005 to 2017 in India as well
as in various sectors is discussed. Allowing for private sector participation can generate more efficiencies by creating more
competition, realization of economies of scale and greater flexibility than is available to the public sector, The PPP route is
also seen as an attractive alternative in developing countries where governments are faced with constraints on borrowing
money for expensive projects and may not have the required expertise in planning or executing large projects.