Evidence on impact of rural roads on poverty and economic development

Rural transport development is key to economic growth and poverty reduction. Without effective transport rural communities would be isolated from markets, health care and education. Studies carried out by Fan and colleagues at the International Food Policy Research Institute in India (1999), Uganda (2004), and Tanzania (2005) found that investment in rural roads gave the highest, or second highest returns, and lifted more people out of poverty, per dollar spent, compared with any other form of public expenditure. Yet nearly one billion rural residents, approximately 68% of the world’s rural population, measured by the rural Access Index (RAI) still do not have all-season
access to road networks. With the support of DFID, the RAI, which is defined as ‘the proportion of the rural population living within two km of an all-season road’ has now been adopted as SDG Indicator 9.1.1. To address the issues of rural accessibility many billions of dollars have been invested in LICs and LMICs to provide safe, reliable, and affordable rural access. It has been estimated that over 4% of World Bank lending is devoted to rural roads (Tsumagari, 2007). India
alone has spent over US$ 2 billion per year since 2000 on rural roads.
This report provides a rapid review of some of the recently published evidence of the impact of such investment. This rapid evidence based assessment builds on the more thorough systematic review conducted by Hine et al. (2016) which found that published studies in general demonstrated a strong link between good access and indicators of socio- economic benefit. The findings of this rapid review confirm the earlier findings by Hine et al. (2016) and demonstrate positive impacts associated with increased income, poverty reduction, employment, agricultural output and sales, education, health, traffic volumes, transport services, transport costs and general economic indicators. In a number of the recent studies it was found that rural road investment encouraged structural transformations of villages by facilitating non-farm employment and enabling migration to urban areas. However, this did not necessarily translate into substantial increases in incomes. In fact Asher and Novosad (2018) found that the Indian Prime Minister’s Gram Sadak Yojana (PMGSY) rural road programme only increased consumption by just 2.3%. In comparison, an earlier study by Asher and Novosad (2016) found the PMGSY programme in India increased incomes by 8% and, a study by Fan et al. (1999) of poverty in rural India, found that rural roads had a relatively large impact, with a benefit cost ratio of three. The Fan et al. (1999) study was based on an analysis of total road length per unit area. However the PMGSY road studies, analysed by Asher and Novosad (2016 and 2018), were very largely on the impacts of upgrading existing roads to a paved
standard and hence these interventions did not increase accessibility (per km built), to the same extent.
The systematic review by Hine et al (2016) found that the highest impacts, were observed for countries with lowest road densities. For example in Ethiopia, access to a rural road increased the local growth rate by 9% per year (Dercon et al 2012), similarly Wondemu (2010) found that between 1989 and 1994, households with access to all weather roads generated 90% greater income. In 2000 Ethiopia, only had a road density 0.04 km per sq km, and Tanzania (reported on
by Fan et al 2005) had a road density at the time of around 0.09 km/sq km. In comparison for the last 100 years India has had by far the highest road density of any large developing country (i.e., currently 1.67 km per sq km). There is good reason to believe that diminishing marginal returns are present, and that the current Indian experience would not necessarily be reflected in other countries.
Despite the huge expenditure on rural roads in India there have been few robust impact studies
published relating to PMSGY. The new substantial study of the effects of the PMGSY programme
on health is particularly welcome (Banerjee and Sachdeva, 2015). The study shows a wide range
of beneficial effects of the programme on health outcomes. Large scale studies of this sort on
health have not previously been carried out. Further studies of the PMGSY, covering all areas,
are clearly required.
With increased interest in climate change a small but growing body of literature outlines the potential negative impacts of roads on forest cover and biodiversity, although it depends on the local context and type of road.