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Home > Business/Finance > Diversified Services > Shipping & Logistics
India Freight Transport Report Q3 2007
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The Indian economy is one of the fastest growing in the world, but the boom is not without its stops,
starts and bottlenecks, all of which make themselves felt in the country’s freight transport sector. In fact,
according to a recent study by the Confederation of Indian Industry, the country needs US$330bn in
infrastructure investment over the next five years to sustain its economy’s growth at 8% annually.
Inadequate port facilities, poor road infrastructure and frequent power cuts prevent Indian industries from
operating efficiently and expanding sales. India needs to increase its spending on infrastructure projects to
8% of the country’s GDP from 4.6% at present. Despite these obstacles, however, BMI’s India Freight
Transport Report Q3 2007 concludes that the country will reach average annual freight traffic growth of
11.1% in the 2007-2011 period.
Strong economic and foreign trade growth is underpinning the freight upturn. Demand in the road freight
sector is boosted by door-to-door logistics, the move to higher value/lower bulk shipments, the rising size
of the vehicle fleet and the new impetus to improve and extend the network, using private-sector highway
operators and build-operate-transfer (BOT) schemes. Rail will experience steady but less spectacular
growth, given the predominance of the state-controlled Indian Railways; however, even here some
promising signs of reform are beginning to emerge. All other transport modes should experience faster
growth, with international air cargo turnover performing strongly as more private airlines join the market.
Sea transport through India’s major ports will also perform well. A major factor over the next few years
will be the rising competitive pressures from cargo operators among India’s immediate neighbours and
main trading partners.
The dynamic pace of development and competitive wages are delivering a significant boost to the
industry, largely offsetting the traditional problems of poor infrastructure and bureaucracy. To this must
be added a favourable operating environment. BMI has given India a composite score of 51 (out of a
possible maximum of 70 and a regional average of 44.8) in our freight sector business environment index,
which places it at the top end of the regional ranking list. It scores very highly in the freight growth
category, but performs less well in the regulatory environment, long-term economic risk and
infrastructure growth categories.
For the 2007-2011 forecast period we expect the transport and communications sector to outpace the
economy as a whole. It will achieve average annual growth of 8.4%, versus 8.1% for overall GDP. The
total value of transport and communications GDP will rise to US$93.3bn in nominal terms by 2011,
representing 7.6% of India’s GDP.
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