STORY HIGHLIGHTS
- Roads carry almost 85 percent of the country’s passenger traffic and more than 60 percent of its freight.
- Rail carried some 19.8 million passengers and 2.4 million tonnes of freight a day in year 2009 and is one of the world’s largest employers.
- Major improvements in the sector are therefore required to support the country’s continued economic growth and to reduce poverty.
India’s transport sector is large and diverse; it caters to the needs of 1.1 billion people. In 2007, the sector contributed about 5.5 percent to the nation’s GDP, with road transportation contributing the lion’s share.
Good physical connectivity in the urban and rural areas is essential for economic growth. Since the early 1990s, India’s growing economy has witnessed a rise in demand for transport infrastructure and services.
However, the sector has not been able to keep pace with rising demand and is proving to be a drag on the economy. Major improvements in the sector are therefore required to support the country’s continued economic growth and to reduce poverty.
Roads. Roads are the dominant mode of transportation in India today. They carry almost 85 percent of the country’s passenger traffic and more than 60 percent of its freight.
The density of India’s highway network — at 0.66 km of roads per square kilometer of land – is similar to that of the United States (0.65) and much greater than China’s (0.16) or Brazil’s (0.20).
However, most roads in India are narrow and congested with poor surface quality, and 33 percent of India’s villages do not have access to all-weather roads.
Rural Roads-A Lifeline for Villages in India: Connecting Hinterland to Social Services and markets
Railways. Indian Railways is one of the largest railways under the single management. It carried some 19.8 million passengers and 2.4 million tonnes of freight a day in year 2009 and is one of the world’s largest employer.
The railways play a leading role in carrying passengers and cargo across India’s vast territory. However, most of its major corridors have capacity constraint requiring capacity enhancement plans.
Ports. India has 13 major and 199 minor and intermediate ports along its more than 7500 km long coastline.
India’s seaborne foreign trade being 95% by volume and 67% by value, the ports play a very significant role in improving foreign trade in a growing economy.
These ports serve the country’s growing foreign trade in petroleum products, iron ore, and coal, as well as the increasing movement of containers.
Over the last decade, the average annual growth rate of port cargo volume has been about 10%.. The future potential for port sector, particularly container ports is huge considering that the container traffic is projected to grow to 40 million TEU by 2025. Inland water transportation also remains largely undeveloped despite India’s 14,000 kilometers of navigable rivers and canals.
Aviation. The dramatic increase in air traffic for both passengers and cargo in recent years has placed a heavy strain on the country’s major airports. Passenger traffic is projected to grow more than 15% annually and it is estimated that the aviation industry, currently 9th largest in the World, will require 30 billion USD investment in the next 15 years to keep pace with the growing demand.
Urban Transport. India is experiencing rapid urbanization with the present urbanization levels at 30% translating to a population of roughly 340 million living in urban areas.
The number of million plus cities is presently at 42 and the urban economy accountd for roughly 60% of the GDP.
Motorisation rates in India are in double digits as in most developing economies. Only about 20 cities out of 87 cities with a population in excess of 500,000 and state capitals have any kind of organized transport and only 3-4 cities could lay claim to a mass rapid transit system.
The share of public transport in cities with population sizes over 4 million has declined from 69% to 38% between 1994 to 2007. Accident and fatality rates are one of the highest in the world affecting primarily the poor and vulnerable without their own means of transport.
Transport infrastructure in India is better developed in the southern and southwestern parts of the country.
Challenges
The major challenges facing the sector are:
• India’s roads are congested and of poor quality. Lane capacity is low – majority of national highways are two lanes or less. A quarter of all India’s highways are congested. Many roads are of poor quality and road maintenance remains under-funded. This leads to the deterioration of roads and high transport costs for users.
• Rural areas have poor access. Roads are significant for the development of the rural areas – home to almost 70 percent of India’s population. Although the rural road network is extensive, some 33 percent of India’s villages do not have access to all-weather roads and remain cut off during the monsoon season. The problem is more acute in India’s northern and northeastern states which are poorly linked to the country’s major economic centers.
• The railways are facing severe capacity constraints. All the country’s high-density rail corridors face severe capacity constraints. Also, freight transportation costs by rail are much higher than in most countries as freight tariffs in India have been kept high to subsidize passenger traffic.
• Urban centers are severely congested. In Mumbai, Delhi and other metropolitan centers, roads are often severely congested during the rush hours. The dramatic growth in vehicle ownership during the past decade – has reduced rush hour speeds especially in the central areas of major cities.
• Ports are congested and inefficient. The average annual growth of cargo volume in the ports in the last decade was close to 10%, However, capacity utilization in some of the major ports remain as low as 58-60% Both bulk and containerized traffic is expected to grow at a much faster pace in future and by some estimate the container traffic is projected to grow to about 4.5 times of the current volume by 2025. India’s ports need to significantly ramp up their capacity and efficiency to meet this surging demand.
• Airport infrastructure is strained. . Air traffic has been growing rapidly leading to severe strain on infrastructure at major airports, especially in the Delhi and Mumbai airports which account for more than 40 percent of nation’s air traffic.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.