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Highway Investments Boost India’s Economy! IIM Bangalore Study Shows 1 Rs Investment Adds 3 Rs to GDP

National Highway investments have significantly boosted India’s GDP, improving household incomes, reducing costs and driving growth in agriculture, MSMEs and infrastructure.

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Each rupee invested in India's highways has led to Rs 3 rise in GDP: IIM-Bangalore study Photograph: (IANS)

A new study by IIM Bangalore reveals that investments in India's national highways sector have had a significant impact on the country's economy, resulting in more than a three-fold increase in GDP. This growth has been driven by the multiplier effect, which has created new jobs, increased household incomes, and improved the overall economy. The study conducted over a period from 2013 to 2022 presents key findings on the socio-economic benefits of national highway development.

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Highway Investment Boosts GDP Growth

According to the IIM Bangalore study, every unit of expenditure on national highway construction has led to a remarkable 3.21-unit increase in the country's GDP. This multiplier effect highlights the critical role of infrastructure development in fostering economic growth. With the highways sector receiving substantial investments, these projects have enhanced connectivity, which in turn has stimulated various sectors of the economy.

Economic Impact on Household Incomes and Expenditures

The expansion of the national highway network has contributed to a 9% increase in household incomes, with a 6% rise in household expenditure. These improvements have allowed families across the country to spend more, boosting demand and stimulating further economic growth. Additionally, the development of highways has resulted in a double-digit surge of 10.4% in car sales, reflecting greater consumer confidence and purchasing power.

Benefits to the Supply Chain and Agriculture

The improved highway infrastructure has made a noticeable impact on the efficiency of the supply chain. Transportation costs have dropped by nearly 3% between factories and suppliers of raw materials, and by 1.33% between factories and customers. This reduction in transportation costs reflects improved supply chain efficiency and supports industries in reducing their operational costs. Furthermore, the highways have provided a major boost to agriculture and MSMEs (micro, small, and medium enterprises), which are critical to the nation's employment.

A Positive Effect on Society and Environment

In addition to economic benefits, the expansion of national highways has had several positive social and environmental impacts. The new highways have improved access to education, healthcare services, and community resources. Moreover, the study points out a reduction in crime rates, accidents, pollution, noise levels, and traffic congestion in areas with developed highways.

The Growing Highway Network and NHAI Investments

In 2023-24, the National Highways Authority of India (NHAI) set a record by investing Rs 2.07 lakh crore in national highway construction. This represents the highest-ever capital expenditure on highways, with a 20% increase compared to the previous year. Over the last decade, the length of India’s National Highway network has grown by 60%, from 91,287 km in 2014 to 146,195 km in 2024, making it the second-largest road network globally. Additionally, high-speed corridors have surged from 93 km in 2014 to 2,474 km in 2024.

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