8.2 Construction of Infrastructure Indices

  • Infrastructure Index
    • The proposed Infrastructure Index will be based on items, which will be expected to have strong correlation with productive activity. Bearing this in mind the following illustrative activities are proposed for inclusion in the Index:

      • Length of railway tracks (X1)

      • Length of roads of appropriate quality (X2)

      • Length of runaways (X3)

      • Number of berths at ports (X4)

      • Number of telephone connections (X5)

      • Transmission of electricity: length of cables (X6)

      • Generation of electricity (X7).

    • The ratio of the numerical value of an infrastructure facility (say in terms of kilometres of railway tracks) in year t to its numerical value in the base year (i.e. year 0) will be denoted by Ik (k=1….7). Thus,

      Ik = Xkt/Xk0

      (where Xkt and Xkdenote values of  Xk at time points ‘t’ and ‘0’ respectively).

    • The creation of an index based on the seven illustrative items listed above will require weights to be attached to each of the components. Once these weights have been determined the index may be computed by a simple weighted aggregation. A possible way of determining weights is to base them on the value of capital stock of each of the components. It may be noted that valuation of capital stock is an important data collection activity, which will have to be undertaken. Denoting the value of capital stock of each facility as  'ki' , i =1….7, the weight, wi, for each will be given by:

      formula Img .

    • The value of capital stock and the associated weight will have to be computed for a base year, which would need to be periodically revised, so as to reflect the changing pattern of infrastructure investment in the country. Once the weights have been computed, the aggregation will proceed as:

      Infrastructure Index = w1I1 + w2I2 +w3I3 + w4I4 + w5I5 + w6I6 + w7I7.


    • As is usual in the creation of an index, the Infrastructure Index will be normalised to equal 100 in the base year. For subsequent years, a change in any one or more of the ratios Ik will be reflected in a change in Infrastructure Index.


    • Depending on the components of the infrastructure, it will be possible to define the index in a variety of ways. For instance, focusing on the transport sector will lead to an index only in terms of the following components: Length of railway tracks (X1); Length of roads of appropriate quality (X2); Length of runaways (X3); Number of berths at ports (X4).

  • Infrastructure Utilisation Index
    • The Infrastructure Utilisation Index will have to set up norms for the maximum permissible utilisation of an infrastructure facility. For instance, in the case of railway tracks there is, allowing for abundant safety, a maximum number of trains that can run per time period (say, a day). Any increase above this maximum will indicate critical shortages and severe compromise on safety; a substantial gap between the maximum and actual utilisation will be indicative of a slack.

    • The ratio of actual utilisation (Ak) of a facility to the maximum permissible utilisation (Mk) will be given by:

      Uk = Ak/Mk,   k=1….7.

    • Using the weights proposed above will lead to the following Infrastructure Utilisation Index:

      Utilisation Index = w1U1+ w2U2 + w3U3 + w4U4 + w5U5 + w6U6 + w7U7.

    • The maximum value of this index will be normalised to equal 100. The actual value of an index for any year will indicate the level of utilisation of the selected infrastructure facilities.

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