CEIC Data Blog

Will Indian Railways Meet Its Vision 2020?

 

India Data Talk: Indian railway forms one of the country’s most important infrastructures. With an extensive network covering all regions and almost all states, the railways plays an important role in goods transportation and passenger commuting. Connecting centres of commerce and industry, places of pilgrimage, historical sites, tourist attractions, hinterlands, and ports, Indian railway is integral to the country’s overall economic growth.

Over the past 60 years, the growth of Indian railway traffic has far exceeded the growth in its railway track expansion. Passenger originated traffic increased sixfold from 1.28 billion units in 1950-1951 to 7.65 billion units in 2010-2011. Goods originating traffic increased thirteenfold from 73 million tons to 922 million tons in freight traffic during the same period. On the flip side, the length of railway tracks only doubled over six decades, from 78,000 km to 114,000 km as of March 2011.

Indian Railways RevenuesIndian Railways RevenuesChart provided by: CEIC

The growth in India railway revenues has also been declining since its peak during the fiscal year ending March 2007. Although India Railway revenues grew at 7.5% and improved to INR 864.8 billion in 2010-2011 from INR 804.3 billion the previous year, this growth rate was barely half of its peak growth of 15.1% in 2006-2007. The sluggish growth rate in total railway revenues is attributable to slower growth in revenues from goods transportation, accounting for about 70% of total railway revenues. Although growth in passenger revenue – constituting 30% of total railway revenues – increased by 9.8% in 2010-2011, compared to 7.1% in the previous year, these growth rates were insufficient to compensate for the sharper decline in revenues from goods transportation.

India has identified its railway transportation network as instrumental in its long-term economic development and hence seeks to enhance the railway transportation network and capacity through “Indian Railways Vision 2020”. Vision 2020 aims to promote inclusive geographical and social development, strengthen national integration, generate large-scale productive employment, and support environment sustainability. As part of Vision 2020, the Ministry of Railway seeks to raise the railway revenues to a GDP ratio of 3%. Although railway revenues in India have remained around 1.3% of the country’s gross domestic product in the past decade, the Ministry of Railway is targeting 10% annual growth for Indian Railway revenues over the next 10 years in order to meet the goals of Vision 2020.

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By Chan Yee Lui – CEIC Analyst

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