PR Log (Press Release) –
Jan 30, 2010 – The Road Transport and Highways Ministry of India is looking for US$2.96bn in credit from the World Bank for the development of highways in the country, reported India's Economic Times in September. The loan would cover 70% of the total cost of developing 5,937kms of highways that would run through 14 states in the country. The remainder of the cost would be provided by the government. A senior official has stated that roads that have low traffic projections and are the outside the purview of the National Highways Development Programme (NHDP) require funding by the government. India boasts the second largest road network in the world after the US, with a total of 3,383,344km of roadways, of which 1,603,705km is paved. The majority of the country's freight is transported by road. In 2009, BMI predicts that 53% of total freight transported will be carried by road. This is expected to grow to 55% by the end of the forecast period. Demand is also rising from increasing car ownership. India's transport infrastructure must cater for a booming population, a growing economy and a demanding import and export sector. To facilitate this growth, India will have to invest in maintaining and upgrading its current network, as well as plan to expand its paved road network. Since our last report, we have lifted our forecasts for Indian gross domestic product (GDP) growth. We estimate that growth in 2008 was 6.7%, and expect it to ease to 6.1% in 2009 (was 5%). Across the 2009-2013 forecast period, we project average annual GDP growth of 6.7% per annum - a drop on the 8.6% of 2004-2008. In spite of the global economic slowdown in 2009-2010, we therefore still see a solid foundation for growth in the freight transport industry. We have maintained earlier mode-specific freight turnover forecasts. On the shipping side, we edged down the forecasts to take account of lower growth in world trade. We have also reduced the air freight forecast, in view of the fall in demand and financial difficulties faced by the industry. As a result of all these factors, total freight carried, measured in million tonne-km (mntkm), is expected to grow by an annual average of 7.7% throughout the forecast period. According to our latest estimates, transport and communications (T&C) GDP rose by 7.4% in 2008, 0.7pps faster than overall GDP, which we estimate to have increased by 6.7%. For the 2009-2013 forecast period we expect the T&C sector to continue outpacing the economy as a whole by a small margin. It will achieve average annual growth of 6.8%, versus 6.7% for overall GDP. The total value of T&C GDP will rise to US$152.2mn in nominal terms by 2013, representing 7.7% of India's GDP. Despite the current adverse international climate, BMI expects that overall investment in Indian infrastructure will gather pace over the next five years. Several major road-building projects are already under way, as well as airport expansion plans. Perhaps more so than in other countries, there will be a close link between the pace of structural reform and the rate at which new investment begins to flow into infrastructure projects. Those areas that stay predominantly under public-sector control are likely to see slower progress on new infrastructure projects, which will be constrained by fiscal austerity and bureaucratic delays. In our view, the growth potential in the transport sector is likely to be the greatest in those areas where the authorities are prepared to contemplate reforms; as well as (reasonably briskly) contemplating opening up the current monopolies in the country to greater competition. A case in point is road haulage, where once the 'infrastructure deficit' begins to be closed, numerous factors will underpin dynamic future performance. These range from: the increased demand for door-todoor logistics; the move to higher value/lower bulk shipments; the rising size of the vehicle fleet and the new impetus to improve and extend the network; and using private sector highway operators and buildown- operate (BOT) schemes. We are predicting that road freight turnover, measured in mntkm, will rise by an average of 8.7% every year in 2009-2013. This will be above the rate of GDP growth. Amid some new and encouraging signs that reform is slowly taking hold within the vast Indian Railways company, we are becoming more optimistic about rail freight prospects. We forecast that freight carried by rail will rise by an annual average expansion of 7.3%. All other transport modes should experience broadly comparable growth, with international air cargo turnover gaining an average 6% per annum. Sea transport through India's major ports, measured in tonnage handled, will rise an average 5.5% per annum. A major factor over the next few years driving change will be the rising competitive pressures from cargo operators among India's immediate neighbours and main trading partners.
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