Global experience has shown privatising helps turn around unwieldy national railroads. India must follow suit
Between 2004 and 2008, Indian Railways has not been able to perform to its potential. Normally, Railways’ revenue grows by two percentage points higher than the growth of Indian economy. According to Railways’ own statistics, its revenues growth rate was two percentage points lower than the growth rate of Indian GDP in each of these four years.
The main problem is a severe capacity constraint that does not allow the Railways to carry more freight even when there is demand. Freight traffic has grown by an average of over 9 percent in the last four years but in order to grow further the railways have to concentrate on infrastructure development.
The central government recently set up the National Transport Development Policy Committee to suggest measures to promote greater commercial orientation of transport services in the country. The committee is chaired by Dr. Rakesh Mohan, former deputy governor, Reserve Bank of India, who earlier headed the expert group on Railways that recommended corporatisation of the railway administration in 2002.
(This story appears in the 27 August, 2010 issue of Forbes India. To visit our Archives, click here.)