In any
discussion on economic growth and development, the role of transportation has a
prime position. Transport economics thus would deal with the semantics of
transport infrastructure and mechanisms that propel economic growth in any
country. Often when economy is slowing down, the focus shifts to the
transportation infrastructure. There is increased emphasis on transportation infrastructure
as things gather pace. There will increased movement in construction of new
roads, railway lines, airports, shipping lanes, waterways among other things. It
is not just the emphasis on the national highways but increased allocation and
work happens on the feeder roads and rural roads also. It is not just about new
railway lines but enhancement of existing railway infrastructure also. It is
not about more air traffic but increased connectivity to more cities and
tourist destinations. N the context, it would be pertinent to examine a couple
of instances wherein one finds an economics dimension applied in transport
infrastructure building.
In 2003, NDA-1
announced a massive infrastructure project termed the Golden Quadrilateral. The
aim was to connect the four metros viz Mumbai, Delhi, Kolkata and Chennai. The second
part was to construct a highway between Kanyakumari and Kashmir, the North
South Corridor and the second being the East West corridor between TInsukia and
Bhuj. The execution was something great in the NDA years but their defeat in
2004 ensured the progress slowed down. Yet the project had an interesting
economic angle in contrast to what its critics claimed.
As the roads
improve both in infra support, material used as also the width, it facilitates
and faster movement besides an increase in the number of vehicle movements.
Since the width is more, the vehicles are able to move faster and at the same
time, more vehicles can ply on the road. The throughput increases. This further
implies the vehicles reach their destination faster and hence would be faster
turnaround. This faster turnaround ensures a vehicle makes more trips per month
or per quarter thus an increase in the quantum of cargo transported as also the
number of passengers transported. For every 100 metres of extra width, the number
of vehicle movements more than doubles (let us assume). Thus what one observes is
the increasing returns of scale at play. Similarly as the number of movements
per vehicle increases, there again reflects the principle of increasing returns
which translated into lower fixed costs for the vehicle or the fleet of
vehicles translating it into economies of scale also.
As the cargo
movement increases, the goods reach the market faster. This enables the
reduction in wastage of perishable goods. The move along with good feeder roads
enable the producers of perishables increase their throughput and offer more
goods in the market. As the wastage reduces, the increase in sales increase
their income leading to increased consumption thus some forward and backward
linkages besides the increasing returns accumulated by reaching market early. Thus
golden quadrilateral becomes an interesting example of increasing returns to
scale, economies of scale, and forward and backward linkages.
In the Indian
Railways, there is a often a debate between doubling and electrification of
railway lines. There is a school of thought that believes that the railways
should focus on doubling along with the improvement in signalling infrastructure
whereas another school especially in the establishment believes that electrification
should get precedence. The discussion again merits an analysis on the cost
benefit angle.
The doubling of
railway lines increases the traffic by more than double. It is just not that
number of trains plying will double. In fact they could even triple. In a
single line section, trains stop for a long time for crossing with the incoming
trains. In the double line section, there is no such compulsion. Thus the time
gained in avoidance of crossings will now translate into reaching the
destinations quicker and faster turnaround. The increase in traffic following doubling
of the railway line represents a classic increasing returns whereas, the
increased utilization of the rake represents the economies of scale.
The emphasis of
improved signalling measures too adduce to the same. As one introduces the
in-cab signalling or before that the double-distant system, the throughput
increases. This is an outcome of increased returns but combined with the
doubling of the infrastructure, this would correspond to further higher
returns. The improved signalling infrastructure along with doubling will reduce
the travel time increasing the marginal utility gained by consumers. Their consumer
surplus increases and will be able to save on their working days and increase
their productivity. Ceteris paribus,
there would be movement of cargo and passengers away from road transport to the
railways.
Contrary to the
perception, doubling, signal improvement and electrification are not mutually
exclusive. In fact, electrification adds to the increasing returns and the
corresponding forward and backward linkages discussed above. Electrification
facilitates faster travel relative to diesel locomotives thus a seamless travel
over long distances. The debate on the other hand is about the priorities that
exists in choice among these elements. Usually improvements in signalling are
first step in increasing speeds and throughputs. This is followed by doubling and
then electrification. In fact even before all these upgrading the track infrastructure
would be the first step to allow greater maximum permissible speed for the
trains. Without the track infrastructure others will not be able to contribute
much. They are force multipliers. Thus the doubling versus electrification debate
is not about mutual exclusivity but the order of execution.
The above
examples indicate an application of the concepts of increasing returns and economies
of scale in the domain of transportation. Further the gains accrued is not just
to the transport parties but through the forward and backward spill-overs and
linkages spread to the economy as well. The chain of reactions leading to the above
helps in spurring economic growth.
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