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The Transport Sector Can Drive India To A High Growth Phase

15/04/2015 8:18 AM IST | Updated 15/07/2016 8:25 AM IST
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View of cargo dock at Mumbai Port. Photo Credit: Wikimedia Commons

As the economy begins to show fresh shoots of recovery, albeit after a dreadfully long hiatus, it is safe to say that the next burst of growth like any other in the past will be unevenly distributed. India must make a serious attempt to bridge the gap that exists between its western and eastern states. Recognising the ugly divide between the prospering west and faltering east, Prime Minister Narendra Modi has expressed his desire to bridge the same. If he succeeds, it would be the single biggest push to India's GDP -- bigger than any liberalisation measure has so far achieved. In that case, growth engines could be expected to follow a spatial pattern that spans the length and breadth of the country.

Patterns of growth

As envisioned, a Smart City will provide a nucleus around which growth will pick up in concentric circles. Port cities will fuel the growth tremendously as trade to GDP ratio spirals up. Growth will also follow a dendritic pattern with projects like Delhi-Mumbai Industrial Corridor beginning to mushroom. Since growth will happen along such concentric nuclei and elongated dendrites, transport of people and material will be important along the length of dendron, from one nucleus to another, between a nucleus and a dendron and also from each nucleus and dendron into the hinterlands.

"Without sounding too pessimistic, let me say that the diagnosis by Suresh Prabhu -- "chronic under-investment in Railways" -- is 100% correct."

The transport sector, in such a scenario, holds immense possibilities for the Indian economy. Transport will not only facilitate the formation of such nuclei and dendrites but also help in accretion around each nucleus, elongation of and branching around each dendron. The good news is that the government already seems to have recognised the potential of the transport sector.

freight trains india

The railway sector

A lot of noise has been made about how railways will be utilised to fuel growth in the economy. The Economic Survey of 2014-15 is quite explicit. The Survey puts railways in the larger backdrop of kick-starting growth by a spurt of public investment which is supposed to crowd in private investment further down the road. The backward and forward linkages of the railways imply that the multiplier effect -- the document calculates -- of Re 1 in the railways is Rs. 5 in other sectors. The Survey goes on to say that the present government can do for the railways what the previous NDA government did for rural roads.

In terms of vision, the rail budget presented by Suresh Prabhu could hardly have been better. However while the plan outlay has increased by 52% over the Revised Estimates of 2014-15, the increase in Gross Budgetary Support is a bit lower at 33%. Accounting for inflation, the increase stands at a still lower 21%. Ergo, in order to stay true to the plan outlay, the railways is banking on a surge in internal generation, market borrowings and PPP. Internal generation is unlikely to pick up anytime soon. The latter two are constrained in the current environment of bad debts and poor regulatory structure. Without sounding too pessimistic, let me say that the diagnosis by Suresh Prabhu -- "chronic under-investment in Railways" -- is 100% correct. With Suresh Prabhu steering the engine, I trust him with the prognosis too.

The importance of waterways

One of the most transformative steps we have missed out is the decision by the Government to declare 101 waterways as National Waterways. Share of water in freight transport is abysmally low at 6% while the corresponding figures for US, Japan and China are 12.4%, 34% and 47% respectively.

"India cannot sustain a high growth phase for as long as China did without investing on ports similar to what this regional superpower did."

Compared to roads and rails, water is not just cheaper but also more environment-friendly means of transport. Nitin Gadkari has also announced that the government is contemplating setting up five more major ports in the country.

Let me be very clear -- India cannot sustain a high growth phase for as long as China did without investing on ports similar to what this regional superpower did. The container ports at Shanghai, Shenzhen, Hong-Kong, Ningbo, Guangzhou, Qingdao and Tianjin each handle capacity of more than 10 MTEU (million Twenty foot Equivalent Units) while no such high-capacity port exists in India. Jawaharlal Nehru Port at Navi Mumbai, the largest container port in India, has a capacity to handle 4.8 MTEU compared to 29.1 MTEU at Shanghai. At the same time, India has to devote sufficient attention and resources to connect ports with the hinterland using the rail, road or the waterways.

india railway

Upgrading urban transport

Urban transport is one of the major polluters of Indian cities. The pollution levels in Indian cities call for a drastic rethinking on urban transport. Public transport capacity has to be augmented dramatically. The number of cars on the road emitting carcinogenic smoke has to be reduced. The cities have to invest resources to build and maintain good pavements and cycling tracks.

"Given the inter-modal nature of transport, a consolidated Ministry of Transport will help immensely in optimising outcomes and saving resources."

A study by Clean Air Initiative for Asian Cities has found that Indian cities score poorly on 'walkability' when compared to other Asian cities. I hope the Centre as well as the states are mulling over different options ranging from congestion pricing to making cities car-free.

The transport sector in India currently faces many challenges but also presents path-breaking opportunities. Given the inter-modal nature of transport, a consolidated Ministry of Transport will help immensely in optimising outcomes and saving resources. Different ministries and departments operating in silos clearly lead to sub-optimal outcomes. China, the only other large country which had a separate Ministry of Railways has now fused it into a Ministry of Transport. Will India follow?

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