India’s transport sector is large and diverse; it caters to the needs of 1.1 billion people. In 2007, the sector contributed about 5.5 percent to the nation’s GDP, with road transportation contributing the lion’s share.

Good physical connectivity in the urban and rural areas is essential for economic growth. Since the early 1990s, India’s growing economy has witnessed a rise in demand for transport infrastructure and services.

However, the sector has not been able to keep pace with rising demand and is proving to be a drag on the economy. Major improvements in the sector are therefore required to support the country’s continued economic growth and to reduce poverty.

Roads. Roads are the dominant mode of transportation in India today. They carry almost 85 percent of the country’s passenger traffic and more than 60 percent of its freight. The density of India’s highway network — at 0.66 km of roads per square kilometer of land – is similar to that of the United States (0.65) and much greater than China’s (0.16) or Brazil’s (0.20). However, most roads in India are narrow and congested with poor surface quality, and 33 percent of India’s villages do not have access to all-weather roads.

Rural Roads-A Lifeline for Villages in India: Connecting Hinterland to Social Services and markets

Railways. Indian Railways is one of the largest railways under the single management. It carried some 19.8 million passengers and 2.4 million tonnes of freight a day in year 2009 and is one of the world’s largest employer. The railways play a leading role in carrying passengers and cargo across India’s vast territory. However, most of its major corridors have capacity constraint requiring capacity enhancement plans.

Ports. India has 13 major and 199 minor and intermediate ports along its more than 7500 km long coastline. India’s seaborne foreign trade being 95% by volume and 67% by value, the ports play a very significant role in improving foreign trade in a growing economy. These ports serve the country’s growing foreign trade in petroleum products, iron ore, and coal, as well as the increasing movement of containers. Indian ports handled cargo of 850 million tonnes and about 9.0 million TEU container traffic in year 2010. Over the last decade, the average annual growth rate of port cargo volume has been about 10%.. The future potential for port sector, particularly container ports is huge considering that the container traffic is projected to grow to 40 million TEU by 2025. Inland water transportation also remains largely undeveloped despite India’s 14,000 kilometers of navigable rivers and canals.

Aviation. India has 128 airports, including 15 international airports. Indian airports handled 142 million passengers in 2010-11 and 1.6 million tonnes of cargo in year 2009-10. The CAGR for the domestic passenger and freight growth over the last decade has been 14.2% and 7.8% respectively. The dramatic increase in air traffic for both passengers and cargo in recent years has placed a heavy strain on the country’s major airports. Passenger traffic is projected to grow more than 15% annually over 2011-13 and it is estimated that the aviation industry, currently 9th largest in the World, will require 30 billion USD investment in the next 15 years to keep pace with the growing demand.

Urban Transport. India is experiencing rapid urbanization with the present urbanization levels at 30% translating to a population of roughly 340 million living in urban areas. The number of million plus cities is presently at 42 and the urban economy accountd for roughly 60% of the GDP. Motorisation rates in India are in double digits as in most developing economies. Only about 20 cities out of 87 cities with a population in excess of 500,000 and state capitals have any kind of organized transport and only 3-4 cities could lay claim to a mass rapid transit system. The share of public transport in cities with population sizes over 4 million has declined from 69% to 38% between 1994 to 2007. Accident and fatality rates are one of the highest in the world affecting primarily the poor and vulnerable without their own means of transport.

Transport infrastructure in India is better developed in the southern and southwestern parts of the country.

The major challenges facing the sector are:

• India’s roads are congested and of poor quality. Lane capacity is low – majority of national highways are two lanes or less. A quarter of all India’s highways are congested. Many roads are of poor quality and road maintenance remains under-funded. This leads to the deterioration of roads and high transport costs for users.

• Rural areas have poor access. Roads are significant for the development of the rural areas – home to almost 70 percent of India’s population. Although the rural road network is extensive, some 33 percent of India’s villages do not have access to all-weather roads and remain cut off during the monsoon season. The problem is more acute in India’s northern and northeastern states which are poorly linked to the country’s major economic centers.

• The railways are facing severe capacity constraints. All the country’s high-density rail corridors face severe capacity constraints. Also, freight transportation costs by rail are much higher than in most countries as freight tariffs in India have been kept high to subsidize passenger traffic.

• Urban centers are severely congested. In Mumbai, Delhi and other metropolitan centers, roads are often severely congested during the rush hours. The dramatic growth in vehicle ownership during the past decade – has reduced rush hour speeds especially in the central areas of major cities.

• Ports are congested and inefficient. The average annual growth of cargo volume in the ports in the last decade was close to 10%, However, capacity utilization in some of the major ports remain as low as 58-60% Both bulk and containerized traffic is expected to grow at a much faster pace in future and by some estimate the container traffic is projected to grow to about 4.5 times of the current volume by 2025. India’s ports need to significantly ramp up their capacity and efficiency to meet this surging demand.

• Airport infrastructure is strained. . Air traffic has been growing rapidly leading to severe strain on infrastructure at major airports, especially in the Delhi and Mumbai airports which account for more than 40 percent of nation’s air traffic.