Contribution of Railway industry to make India a 5 Trillion USD Economy by 2024

Introduction: The Indian Railways is one of the largest Rail Network in the world. The Indian Railways route length network is spread over 115,000kms with 12,617 passenger trains and 7,421 freight trains each day from 7349 stations carrying 23 million travelers and 3 million tonnes of freight daily. India’s railway network is recognized as one of the largest railway systems in the world under One Single management.

 The railway network is ideal for long–distance and movement of bulk commodities, apart from being an energy efficient and economic mode of conveyance and transport. Indian Railways is also the preferred carrier of automobiles in the country with loading growing 16% in 2017-2018. The Government of India is focused on investing in railways to improve infrastructure for freight and high speed trains.  Presently many foreign companies are also looking to invest in the Growth story of Indian Railways.

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Railways critical for India’ GDP: For years, Railways has been losing market share to other modes of transportation , but now the Indian Railways are expected to make a recovery with  the two dedicated freight corridors ( to be operations soon ) , various new railway lines becoming  operational, and witnessing steady growth in passenger and freight traffic, in every absolute terms . Further transport investment is expected to be risen sevenfold from 11th to 15th plan (2027-32) or from 2.9% of GDP right now to 3.8% in another few years and then be sustained at that level.

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A Single Percent step up is a big one as it has a compounding impact on the development opportunities. Further much of the investment will have to come from the public sector. The private share was expected to contribute to this growth and rise to around 25-30% over a decade but the state of private infrastructure firms’ balance sheets shows this as way too optimistic. Additionally, the investment required by the Railways is huge in terms of Capital and More than the money which is a big challenge, it is clear the present challenge is beset with problems of operational and planning approvals by the government, which is now gradually improving. 

Market Size and Development: Indian Railways is a big contributor to the GDP of the country and the revenues have increased at a CAGR of 5.48% during FY07-FY19 to US$ 27.13 billion in FY19 and earning from the passengers business grew at a CAGR of 5.58% during FY07-FY19 to reach US$ 7.30 billion in 2018-19. 

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Also, Freight revenue has risen at a CAGR of 5.84% during FY07-FY19 to reach US$18.30 billion in 2018-18. India was one of the Top 20 exporters in railways globally as 2017 & India’s railway exports have grown at a CAGR of 27.05% during 2010-2017 to US$ 303.29 million. Foreign Direct Investment (FDI) inflows into the Railways Related Components from April 2000 to March 2019 stood at US$ 926.28 million. 

In December 2018, France based Alstom announced plans to augment its coach production capacity at its facility in Sri City from cars per month to 24 cars per month. It will set up a new production line to increase capacity to 44 cars per month by the end of 2019.

Image Credit: Alstom

Initiatives: Few initiatives taken by the Government

  1. In December 2018, the Government of India is considering a High Speed Rail corridor project between Mumbai and Nagpur.
  2. Indian Railways  is also planning to come out with the new export policy for railways to boost further development in this sector 
  3. The Government of India is also working on the “National Rail Plan” which enables the country to integrate its rail network with order modes of transportation and develop a multi-modal transportation network.
  4. The Indian Government has signed an agreement with the Government of Japan under which they will help India in the Implementation of the Mumbai-Ahmedabad high speed rail corridor along with financial assistance that would cover 81% of the total project cost.

Image Credit: NHSRCL

Increase of budgetary spending in Infrastructure: On a year to year basis the budgetary spending increased in the April-June 2018 quarter which was the sharpest for the railways. Further, It is expected that the Railways will provide over 400,000 jobs in the next two years. The recruitment will include the new provision of a 10% quota for upper caste economically poor section that will translate to more than 20,000 jobs for people in this category.

Indian Railways has a sanctioned strength of 15.05 lakh, out of which 2.83 lakh posts are still vacant.

Conclusion: The Indian Railway network is growing at a healthy rate, in the next five years & the Indian railway market will be the third-largest and account for 10% of the global market. It is projected that freight traffic will increase to 3.3 billion tonnes by 2030 from 1.1 billion tonnes in 2017. This increase shall also be due to the dedicated freight corridors which will increase the freight capacity at a CAGR 5.4% to 182 MT in 2021-22 from 140 MT in 2017-17.