Link public support to Railways but with reforms

NEW DELHI: A day after Railway Minister Suresh Prabhu expressed his desire to not lean too much on the Finance Ministry for funds, the Economic Survey today recommended that the government should revive public investment in services like the Railways which can act as a ‘key engine of growth’ in the short run.

Girja Shankar Kaura

Tribune News Service

New Delhi, February 27

A day after Railway Minister Suresh Prabhu expressed his desire to not lean too much on the Finance Ministry for funds, the Economic Survey today recommended that the government should revive public investment in services like the Railways which can act as a ‘key engine of growth’ in the short run. But such a support should be reform-linked, the survey said.

Discussing the specific role of Indian Railways in driving future Indian growth, the Survey says, “There is a merit in the case for reviving public investment as a key engine of growth in the short run — not to substitute for private investment but to compliment and promote further private investment”.

It further says public investment in an efficient rail network can have positive effect on both manufacturing and aggregate output and the effects are permanent.

It has advocated the need for “a bold, accelerated programme of investment in dedicated freight corridors (DFCs) that can parallel the Golden Quadrilateral in the road sector along with associated industrial corridors.”

It has also recommended that the Narendra Modi government invest in the development of Railways, much like the Atal Behari Vajpayee government had invested in roads, saying that “This boost in spending could in turn boost private investment without jeopardising India’s public debt dynamics. Such an initiative will transform Indian manufacturing industry with “Make in India” becoming a reality.”

The Survey calls for large public investment in Railways as there is a strong case for channeling resources to transport infrastructure in India given the widely known spillover effects of transport networks to link markets, reduce a variety of costs, boost agglomeration economies, and improve the competitiveness of the economy, especially manufacturing which tends to be logistics-intensive.

It indicates that successive plans have allocated less resources to the Railways compared to the transport sector and the share of Railways in the total plan outlay is currently only 5.5% compared to 11% for the other transport sectors.