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India Freight Transport Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8564 Description The Road Transport and Highways Ministry of India is looking for US$2.96bn in credit from the WorldBank for the development of highways in the country, reported India's Economic Times in September.The loan would cover 70% of the total cost of developing 5,937kms of highways that would run through14 states in the country. The remainder of the cost would be provided by the government. A seniorofficial has stated that roads that have low traffic projections and are the outside the purview of theNational Highways Development Programme (NHDP) require funding by the government. India boaststhe second largest road network in the world after the US, with a total of 3,383,344km of roadways, ofwhich 1,603,705km is paved. The majority of the country's freight is transported by road. In 2009, BMIpredicts that 53% of total freight transported will be carried by road. This is expected to grow to 55% bythe end of the forecast period. Demand is also rising from increasing car ownership. India's transportinfrastructure must cater for a booming population, a growing economy and a demanding import andexport sector. To facilitate this growth, India will have to invest in maintaining and upgrading its currentnetwork, as well as plan to expand its paved road network. Since our last report, we have lifted our forecasts for Indian gross domestic product (GDP) growth. Weestimate that growth in 2008 was 6.7%, and expect it to ease to 6.1% in 2009 (was 5%). Across the 2009-2013 forecast period, we project average annual GDP growth of 6.7% per annum - a drop on the 8.6% of2004-2008. In spite of the global economic slowdown in 2009-2010, we therefore still see a solidfoundation for growth in the freight transport industry. We have maintained earlier mode-specific freightturnover forecasts. On the shipping side, we edged down the forecasts to take account of lower growth inworld trade. We have also reduced the air freight forecast, in view of the fall in demand and financialdifficulties faced by the industry. As a result of all these factors, total freight carried, measured in milliontonne-km (mntkm), is expected to grow by an annual average of 7.7% throughout the forecast period. According to our latest estimates, transport and communications (T&C) GDP rose by 7.4% in 2008,0.7pps faster than overall GDP, which we estimate to have increased by 6.7%. For the 2009-2013 forecastperiod we expect the T&C sector to continue outpacing the economy as a whole by a small margin. It willachieve average annual growth of 6.8%, versus 6.7% for overall GDP. The total value of T&C GDP willrise to US$152.2mn in nominal terms by 2013, representing 7.7% of India’s GDP. Despite the current adverse international climate, BMI expects that overall investment in Indianinfrastructure will gather pace over the next five years. Several major road-building projects are alreadyunder way, as well as airport expansion plans. Perhaps more so than in other countries, there will be aclose link between the pace of structural reform and the rate at which new investment begins to flow intoinfrastructure projects. Those areas that stay predominantly under public-sector control are likely to seeslower progress on new infrastructure projects, which will be constrained by fiscal austerity andbureaucratic delays. In our view, the growth potential in the transport sector is likely to be the greatest in those areas where theauthorities are prepared to contemplate reforms; as well as (reasonably briskly) contemplating opening upthe current monopolies in the country to greater competition. A case in point is road haulage, where once the ‘infrastructure deficit’ begins to be closed, numerousfactors will underpin dynamic future performance. These range from: the increased demand for door-todoorlogistics; the move to higher value/lower bulk shipments; the rising size of the vehicle fleet and thenew impetus to improve and extend the network; and using private sector highway operators and buildown-operate (BOT) schemes. We are predicting that road freight turnover, measured in mntkm, will riseby an average of 8.7% every year in 2009-2013. This will be above the rate of GDP growth. Amid some new and encouraging signs that reform is slowly taking hold within the vast Indian Railwayscompany, we are becoming more optimistic about rail freight prospects. We forecast that freight carriedby rail will rise by an annual average expansion of 7.3%. All other transport modes should experiencebroadly comparable growth, with international air cargo turnover gaining an average 6% per annum. Seatransport through India’s major ports, measured in tonnage handled, will rise an average 5.5% per annum.A major factor over the next few years driving change will be the rising competitive pressures from cargooperators among India’s immediate neighbours and main trading partners. Table of Contents
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