You are here: Home » Budget » Economic Survey » Top Stories
Business Standard

Eco Survey pushes for public investment jump in railways

Eyeing for a multiplier effect on the India's growth engine

BS Reporters  |  New Delhi 

Continuing with the line of thinking articulated in his Mid-Year Economic Analysis 2014-15, Chief Economic Advisor Arvind Subramanian, in the Economic Survey 2014-15, made a strong case for increasing public investment to drive economic growth in the coming years.

The Survey says a combination of factors is likely to contrain private investment in the short run. These are a highly leveraged corporate sector, a stressed banking system and problems with the public-private partnership model in infrastructure..

Read our full coverage on Union Budget


Thus, in the short run, the burden of reviving the investment cycle is with the public sector. Over the years, private investment has mirrored the macroeconomic peaks and troughs, while public investment has remained relatively steady.

TURNING THE IGNITION ON
  • Strong case for channeling resources to transport infrastructure, given the wide spillover effect — linking markets, reducing a variety of costs, boost to agglomeration economies and improvement to competitiveness
  • Indian Railways has considerable linkages with the larger economy and investments made here will yield far greater returns

The challenge is to identify the sectors in which greater public investment is likely to have the highest return. The Survey says similar to the impetus for road building provided by a previous (1998-2004) government, the current government should, with reason, turn its attention to railways.

There is a strong case for channeling resources to transport infrastructure, it says, given the wide spillover effect -- linking markets, reducing a variety of costs, boost to agglomeration economies and improvement to competitiveness. Especially in manufacturing, which tends to be logistics-intensive, the Survey states.

Indian Railways (IR) has considerable linkages with the larger economy and investments made here will yield far greater returns, it says. Adding that an increase in railway output by one unit will increase output in the economy by five units. "This large multiplier effect has been increasing over time, with the effect greatest on the manufacturing sector. Thus from a 'Make in India' perspective, investing in railways is likely to yield far higher dividends."

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Sat, February 28 2015. 00:40 IST
RECOMMENDED FOR YOU
.