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Transportation industry in India slowed down by lack of FDI participation

India is the second populated country in the world, so the movement of people across the country would lead to the increase in the traffic for different medium of transport.

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Definition / Scope

Transportation is the movement of people, goods and services across the country. Transportation is the important part of Indian economy. The economic development of the country led to the increase in the development of the transportation in India. Post liberalization has seen a rapid investment in the infrastructure of the transportation system which led to increased development of transportation system.

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Market Overview

Transportation is divided into the 3 types based on the mode of movement i.e. air, rail and waterway. Public transport is the primary mode of transportation preferred by the people of the country. Indian railway network is one of the largest network in the world transport over 8 million people and over 900 million tonnage of goods across the country annually.

India is one of the famous tourist destination in Asia, which is supported by the air network that connects the major cities of the country. Airways is the cheapest mode of transport of goods within the country as well as export to other countries of the world.


Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet

Market Risks

  • Transport volumes in India is less as compared to the developed economy.
  • Interstate taxation of goods has led to the increase in the prices of goods and services which led to further decrease in the improvement of industries.
  • Delay in the infrastructure projects which leads to decline of connectivity.
  • Rural parts of the country is not connected with the highways.
  • People do not prefer waterways to travel within the country as the fare of the ticket is more and more time consuming.
  • Inadequate railway facilities based on the demand of the tickets.
  • Monopoly in railways has led to the decline of the competitiveness.

Top Market Opportunities

  • Development of infrastructure by reducing the lag time in completion of projects.
  • Aggressively building roads connecting the rural populations with the highways.
  • Private participation for competitiveness.
  • Proper governance of the funds send from the central government for the investment in the different projects.
  • Separate state run government bodies tracking the progress of the projects.
  • Innovation in the transportation system.
  • Implementation of technology for tracking the movement of people and goods to understand the demand trends.
  • Tax incentives to the private companies in the infrastructure development.
  • More investment in the water transport to reduce the burden of road and air traffic.

Market Drivers

  • India is the second populated country in the world, so the movement of people across the country would lead to the increase in the traffic for different medium of transport.
  • Increase in the number of towns and urban cities have increased the demand of transportation for the intercity movement.
  • Technology in the transportation system have connected more people.
  • Government is increasing more investment y-o-y for the further development of transportation in the country.
  • Private companies are participating in the bidding for the long term projects in the infrastructure development.
  • The demand for airline and railway is increasing over the years.

Market Restraints

  • Bureaucracy in the government system have led to the decline in the execution of the infrastructure projects. Getting permission from different department is the major challenge for project clearance.
  • Delay in the execution of the projects by the companies.
  • Requires huge amount of investment and the gestation period is also very high.
  • Lack of governance from the government authorities.
  • Lack of FDI in the development of transportation system.
  • Improper optimization of IT infrastructure capturing the demand of the people for the transportation.
  • Government has failed to build proposed roadways and roadways.
  • Inter-state conflicts for the allocation of land which would be used as infrastructure development.

Industry Challenges

  • Lack of FDI Participation in the projects.
  • Monopoly in the railways.
  • Need huge amount of investment.
  • Lack of execution of the projects.
  • The objective of the central and state government are different.
  • Corruption and bureaucracy are the biggest hurdles for the growth.
  • Technology barrier.
  • Lack of tax incentive to the companies who are building projects in infrastructure.

Technology Trends

  • The government is planning to provide free wifi services in the railway platforms for the people.
  • IRCTC website is the most populated website in the country. Servers are built across different parts of the country for the live update on the ticket booking service.
  • Apps are being built by the government bodies to order food and services.
  • Private companies have built ticketing platform for online booking of the tickets by comparison of rates.
  • Tour package companies have tied with the transport for providing services to the people.
  • Government are bringing companies from developed countries to have technology edge in the system.

Pricing Trends

  • The government provides subsidy to the purchase of ticket tickets for travelling across the country as well as inter-city. However the government is reducing the subsidy which has led to the increase in the ticket fares.
  • The prices of the oil is responsible for the increase in the prices of transportation fares in road, air and rail transport. After the deregulation of the prices of petrol and diesel, the fluctuation of oil prices is seen in the prices of the fares of the ticket.
  • Airline industry consists of maximum private players which has led to the competitive pricing of the air ticket and the prices are found to come down over the years.

Regulatory Trends

  • The government is reducing subsidies on the public transport.
  • The government has removed the subsidies on the oil prices due to which the prices of the transportation is increasing q-o-q.
  • Allocation of budget for the development of transport in the prime cities like Mumbai and Delhi.
  • More infrastructure projects are brought by the government.
  • Allocation of funds for the country’s infrastructure development.
  • Promotion of waterways for the development for tourist attraction.
  • Implementation of GST for centralised taxation of goods and services.
  • Prime Minister’s office (PMO) is evaluating the development of the projects.
  • The government is planning for tax incentive to the infrastructure companies.

Other Key Market Trends

The government has brought Make In India project for more investment across sectors in the country. FDI investment for the infrastructure projects is increasing as the government is bringing foreign companies for various projects. The government has fore-casted for connecting more roads from the rural population to the towns and cities.

Market Size and Forecast

  • Indian railway has 63028 route kms of track and it carries over 13 million passengers annually. It runs 14300 trains daily.
  • There are 65590 km of National Highway, 128000 km of state highways, 470000 km of district roads and 2650000 km of rural roads in the country.
  • There are 13 major ports and 200 non major ports for the water transport.
  • Mumbai, Delhi, Chennai and Bengaluru are considered to be one of the heavy air traffic cities of the countries. Indira Gandhi International Airport has carried passengers of 3.5 million followed by Chhatrapati Shivaji International Airport of 3.1 million with a growth of 15% from the previous years.
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Market Outlook

  • The government is taking different steps for removing bureaucracy from the system.
  • Banks and government have come together to figure best possibility for the availability of loans to the infrastructure companies.
  • Government will allow more foreign investment in the country for the growth and development of infrastructure projects.
  • Technology would be highest priority for the integration of users with the system.
  • Providing better services to the customers travelling across the country, is the new guidelines for the development of projects.
  • State governments are allocating lands to the infrastructure companies for the further development of transportation connection different parts of the country.

Technology Roadmap

  • Integration of technology with tech companies for the smooth flow of data and proper management of data collection and storage.
  • Infrastructure building materials are being imported in the country for more improvement.
  • Foreign knowledge sharing are being implemented by the government for more know-how across sectors of transportation developments.
  • The government is revising with the industry players for further development of technology which would help develop the industry in the country.
  • Centralised tracking systems are being implemented across different tolls for tracking of vehicles in the country.
  • Wifi technology is being implemented in the public transport for giving add-on features to the customers.

Distribution Chain Analysis

  • The growth of transportation depends on the overall contribution by the states of the country. The central government allocates revenues for the investment in the transportation system. The projects are allocated based on the best bids given by the companies for the tenders floated by the government.
  • Road tenders, railway tenders and airway tenders are floated and are distributed for the development of the projects.

Competitive Landscape

  • With the expansion towards connecting people with the transport, the government is bringing more projects for development of transport in cities, towns and rural places.
  • Companies bid for the best quotes in winning tenders for the development of infrastructure that would support transportation.
  • Funds are providing by the banks supporting the growth.
  • Technology companies are entering the industry to bring drastic change in the way people get associated with the transport.
  • The government is looking for three important factors- speed, service and connectivity.

Competitive Factors

  • Make In India programme run by the government for the economic development.
  • More opportunities for connecting rural roads with the highways.
  • Investment provided by the banks supports the companies to undertake transportation projects whose gestation period is very long.
  • Technology integration.
  • International companies knowledge sharing for future projects.
  • FDI is increasing in the country in sectors supporting the transportation industry.

Key Market Players

  • Indian Railways
  • Jet Airways
  • Air India
  • Gujarat Pipavav

Strategic Conclusion

The growth story of the country would be supported by the development of the transportation connecting people and goods across the country. The government has understood the importance of the tranport industry and are making continuous effort for the success story of transportation.

Further Reading

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