How Infrastructure Promotes Growth: Sufficient availability of the power, water transport, etc may result in optimal utilisation of assets. Infrastructure developments such as transport, power, finance, etc expand the size of markets and improve productivity significantly. Infrastructure brings modern technology in all sectors. There is a close association between infrastructure spending on and GDP growth. Around 6.5% of the total value added is contributed by infrastructure services in UDCs, 9% in developing countries and 11% in developed countries. Infrastructural development is important not only for economic growth, globalisation and technological innovation in manufacturing but also for poverty reduction.
How Growth Promotes Infrastructure: Growth increases demand of infrastructure. Obviously, as income increases, people will demand more of transport, communication, energy, transport etc. Consequently, in UDCs, basic infrastructure such as water, irrigation is most important. In developing economies, demand for transport grows fast. In developed economies, power and telecommunication occupy more importance.