Impact on international competitiveness: Liberalization of trade policies in many countries have resulted in increased globalisation and intensified competition in world trade. Advances in communication, transport and storage facilities have also intensified the competition in world market. In order to be competitive in international market, the traditional arrangement of production and marketing need to be transformed and take necessary steps to adopt modern logistics management principles in order to achieve cost savings in inventory and working capital and permit rapid response to changing consumer demands. Developing countries wishing to compete in the international market need to develop modern logistics network which are already established in developed industrial countries. The ability of the country to provide the transport and communication services essential for modern logistics management will increasingly determine their ability to compete in international market. Unreliable and inadequate infrastructure will increase the costs of domestic transportation and this will make the export commodities to become uncompetitive at international market. In addition, this also hampers the development of new industrial and manufacturing centres in the interior regions of a country.

Impact on domestic market development: Quality of infrastructure has a profound impact on the development of the domestic market. For instance, the prices of agricultural commodities from rural areas have a huge cost attributable to transportation and marketing costs. Availability of quality infrastructure will have a major effect in improving the marketing opportunities and reducing the transaction costs. Satisfactory rural road rehabilitation and maintenance along with widespread access to price information through proper communication channel will play a key role in development of rural market.

Contributions to Growth through Structural Change

Investment in infrastructure, besides leading to reduction in costs and improving the productivity, lead to economic diversification due to opening of new production centers; change the pattern of production and consumption; affects quality of life, welfare, and wealth of the people; and have positive and negative effects on the environment.

Economic diversification: Improved infrastructure not only affects the production costs and profitability but also create structural changes on the economy. In case of rural economy, improved infrastructure such as improved rural roads increases the productivity of agricultural sector and present opportunities to people to engage in alternative form of employment other than agriculture, resulting in higher overall earnings. The availability of alternative sources of income affect the income level, shift demand from locally-available goods and give more attention to healthcare facilities.