Going Strong

IR’s growth, key focus areas and outlook

In the past few years, Indian Railways (IR) has made great strides in improving its level of service. According to the Economic Survey 2018-19, IR carried 1.2 billion tonnes of freight and 8.4 billion passengers in 2018-19, making it the world’s largest passenger carrier and fourth-largest freight carrier. A significant segment of the country’s infrastructure, the railways has been clocking high growth rates on the back of a slew of new investments and initiatives. The sector is abuzz with activity, and has introduced well-timed policy measures and investment plans for future works as well. More recently, IR showcased its agility by converting its coaches into isolation wards to stem the spread of COVID-19 pandemic across the country.

A snapshot of the railway sector’s growth, investment plans and overall outlook…

Network size and growth

At about 67,415 route km (rkm), the railway network increased at a compound annual growth rate of nearly 1 per cent during the period 2014-15 to 2018-19, as per the latest information by the Ministry of Railways. In terms of running track km, the network increased from 94,270 km in 2017-18 to 95,981 km in 2018-19 and . Growth in electrification of the rail network has been extremely impressive. In 2018-19, IR electrified 5,276 rkm of its broad gauge network, an increase of 29 per cent over the previous year (but lower than the target of 6,000 km).

In terms of the modal share of railways, IR handles about 35 per cent of the total freight transported in the country. According to industry estimates, the cost of freight movement by road is Rs 2.58 per tonne km as compared to Rs 1.41 per tonne km for rail and Rs 1.06 per tonne km for waterways. Despite favourable economics, IR has been losing some of the potential traffic to the road sector which has offered more reliability and last-mile connectivity.

Key trends and focus areas

  • Quantum leap in capital expenditure: IR’s capital expenditure has been registering encouraging growth for the past few years. The average annual capital expenditure during 2014-18 was more than double the average during 2009-14. The capital expenditure recorded a compound annual growth rate (CAGR) of about 14 per cent from 2015-16 to 2019-20. The budgeted capital expenditure for 2020-21 stands at Rs 1.61 trillion.
  • Network expansion and decongestion: Higher investments have been consistently made in network expansion and decongestion works. During 2014-19, a track length of 13,124 km has been commissioned, which is 173 per cent of the commissioning achieved during 2009-14 (7,599 km). During April-August 2019, 704 km of new line, gauge conversion and line doubling works were undertaken, an increase of 36 per cent from 518 km in April-August 2018.
  • Safety in train operations given priority: From 2014-15 to 2018-19, safety-related expenditure has increased at a CAGR of approximately 14 per cent. In 2019-20, IR allocated Rs 50 billion to its safety fund – the Rashtriya Rail SanrakshaKosh – from its internal revenue. This is the same as the allocation made in the past two years. The central government too has allocated Rs 200 billion for this fund. New technologies such as automatic block signalling are also being deployed for enhancing safety standards.
  • Introduction of new trains and advancements in rolling stock: IR’s coach manufacturing units have been consistently meeting their production targets. Capex of the manufacturing units increased from Rs 20 billion in 2015-16 to Rs 24 billion in 2017-18. Moreover, from 2018-19, IR’s production units have been manufacturing only modern Linke Hofmann Busch coaches.
  • Digital transformation continues: IR has introduced a number of solutions to make bookings and rail travel easier and more comfortable for passengers. Freight operations information systems, control office applications, e-procurement and e-auctioning systems, electronic data interchange, in-house accounting systems (integrated payroll and accounting system and traffic accounts management systems), and e-payment facilities have been introduced for improving customer interface. These applications serve as a source of information for passengers and IR officials.
  • Thrust on timely project execution: Delays in project completion have been a pressing issue in the sector. To expedite project execution, IR has taken measures such as single-point clearance of detailed project reports, guaranteed cash flow to contractors, incentives for completion of projects before time, etc. For better project monitoring, IR launched a contract management system on a pilot basis in 17 railway divisions in January 2020.
  • Technology trends and advancements: IR has been increasingly becoming more open to adoption of new technology solutions to improve operational efficiency. These solutions include the deployment of track management systems anti-collision devices data loggers and electronic interlocking systems, and carrying out predictive maintenance through online reliability-centred maintenance systems. For construction of tracks, bridges and tunnels, there is a growing focus on deploying innovative tools and devices such as the aerial LiDAR topographic survey technique, 09-3X dynamic tamping express machines for track maintenance, and GIS-based land asset management systems for monitoring project implementation.

Investment requirement

Recently, the government unveiled the National Infrastructure Pipeline (NIP) with the aim of channelling investments towards infrastructure sectors by listing out investible projects. The NIP envisions Rs 13.7 trillion worth of investments in the railway sector during the five-year period 2020-25. The figure translates to roughly 13 per cent of the projected infrastructure investments in the country during the period. For a longer time horizon, it is estimated that railway infrastructure will need funds to the tune of Rs 50 trillion for the period 2018-30. Of this, expansion and modernisation targets will require at least Rs 20 trillion, if the requisite capacity additions in passenger and freight segments are to be made.

With this magnitude of investments required, the role of the private sector will be very crucial. There will be significant opportunity for private entities across a wide variety of segments . PPPs could be key to station redevelopment plans. The private sector could also contribute to various aspects of track electrification and doubling, the switch to renewables, the expansion of manufacturing facilities for coaches and locomotives, etc. Besides, identifying new funding sources can be extremely helpful for the sector. The Life Insurance Corporation of India, for instance, is providing financial assistance to the tune of Rs 1.5 trillion for line doubling and electrification works. The multilateral funding route also been tapped, in addition to fund raising through initial public offerings and divestments by the government.

On the revenue diversification front, options such as advertisements, commercial exploitation of vacant land and providing space rights over station buildings, institutional financing, and monetising land along the tracks, are being explored.


The sector is slated to register a quantum leap in infrastructure development in the coming years. The outlook for the next one-two years is positive in terms of opportunities too. However, key issues such as procedural delays and financial concerns need policy attention. While the government’s vision is to involve private players in the sector, it must be noted that this will happen only when a favourable business environment is created. Policy execution is equally important. For the time being though, as is the case with other sectors, railways too is weathering the pandemic crisis as its operations stand suspended. That said, once the crisis passes, the national transporter will play a major role in getting the economy back on its feet.


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