Jul 12, 2016

IR critical for both GDP & Carbon footprint: says Rakesh Mohan at Brookings India seminar

Brookings India hosted a seminar on Transporting India to the 2030s in which Rakesh Mohan focused on India’s transport needs over the next couple of decades, and what we need to do to satisfy them.

Prime Minister Narendra Modi was probably impressed enough by railway minister Suresh Prabhu’s performance to not move him in last week’s Cabinet reshuffle, but more than that, the railways are critical for both India’s GDP as well as its carbon future. Just how critical, was reinforced by former RBI deputy governor Rakesh Mohan at a Brookings India seminar last fortnight—Mohan chaired a committee on India’s transport needs till 2032 and the seminar built upon the work it did over four years.
Brookings India hosted its inaugural session of its Development Seminars @ Brookings India with the paper “Transporting India to the 2030s”by Rakesh Mohan. The talk focused on India’s transport needs over the next couple of decades, and what we need to do to satisfy them. Rakesh Mohan is a Distinguished Fellow at Brookings India and former Executive Director for India to the IMF. The Development Seminars @ Brookings India are an opportunity to facilitate the exchange of ideas and to allow for an engaging discussion on a wide range of topics. The Seminar Series will feature distinguished speakers from a range of disciplines with the audience including people from government, academics, civil society, and the media.

Just a few numbers on India’s transport needs highlight how critical it is to get the railways piece right. If India was to grow at 7% a year, freight transport demand will quadruple by the mid-2030s—if the rate goes up to 8-9%, demand could rise by a factor of six. For passenger traffic, we’re talking of a 15-fold rise—if you think India’s roads and trains are crowded today, think of what this will do. Mohan’s committee’s simulations showed energy demand rising by a factor of four over the next 20 years, steel by eight times … Though a lot of traffic has shifted to road over the past few decades, neither the current network nor what is planned can deal with such volumes. Till 15 years ago, both road and railway networks, Mohan points out, were growing at relatively similar rates, but prime minister Atal Bihari Vajpayee’s Golden Quadrilateral and then the rural roads programme put the roads network on a dramatically different trajectory. While the railways have made a recovery with the two dedicated freight corridors, what is needed is to complete the other corridors that Prabhu mentioned in his last budget speech—while a bullet train may be desirable, its costs have to be seen in comparison with what such corridors can achieve.

Click here to download the paper: “Transporting India to the 2030s”: RakeshMohan_Transport
Click here to download the Presentation: Presentation-Transporting-India-to-the-2030s

Not being able to do this implies a serious infrastructure constraint to further GDP growth since, to take the most obvious example, if coal does not move, there can be no electricity supply to power India’s industrial/services growth. In absolute terms, transport investment needs to rise seven-fold from the 11th Plan to the 15th Plan (2027-32), or from 2.6% of GDP right now to 3.7% in another few years and then be sustained at that level. Apart from the fact that a one percentage point step up is a big one, much of the investment will have to come from the public sector—in the original simulations, the private share was expected to rise to around 25-30% over a decade but the sad state of private infrastructure firm balance sheets shows this was way too optimistic. More than the money which is a big challenge, it is clear the present Railway Board-led governance structure cannot pull off this transformation. Apart from the criticality of building the railway network for GDP growth, India’s Paris goals depend upon increasing the railways’ share in local transport from 36% right now to 45% by 2030—the six freight corridors will lower India’s cumulative railway emissions from 1.26 billion tonnes between 2016-2046 to 0.29 billion tonnes, and to 0.09 billion in a low-carbon scenario. India can’t afford to slip up on widening its tracks.

Key Findings of the Paper
India’s transport growth trends suggest that share of railways in freight traffic has fallen from 90% in 1951 to 30% in 2010, annual deaths on roads have increased by 350% and domestic air passengers have gone up by 800% between 1991 and 2011.
Though there has been road capacity improvement with the Golden Quadrilateral, East-West and North-South highways and transformations in civil aviation, more work is needed to create efficient port structures, reliable urban transport and large capacity railways.
Achieving the target of 7% growth in the 12th Five Year Plan, followed by 9% till 2032 requires a seven-fold increase in transport investment from the 11th Plan to the 15th Plan.
Urgent action is required to ensure that India’s transport infrastructure can service the increasing needs for the movement of bulk energy commodities for the envisaged growth rates.

Prior to joining Brookings India, Rakesh Mohan was Executive Director at the International Monetary Fund, Washington, D.C., representing India, Sri Lanka, Bangladesh and Bhutan. Till early 2014, he was also Chairman, National Transport Development Policy Committee, Government of India, in the rank of a Minister of State. Previously, Dr Mohan has held the positions of Deputy Governor of the Reserve Bank of India; Secretary, Department of Economic Affairs, Ministry of Finance, Government of India; and several key positions in Government of India including Chief Economic Advisor, Ministry of Finance, in 2001-02.

Dr. Mohan has researched extensively in the areas of economic reforms and liberalisation, industrial economics, urban economics, infrastructure studies, economic regulation, monetary policy and the financial sector. He is the author of three books on urban economics and urban development, co-author of one and editor of another on Indian economic policy reforms, and author of two books on monetary policy and central banking and of numerous articles.