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Transport system in India is one of the largest in the world and serves a land area of 3.3 million square km and a population of over one billion. It consists mainly of roads, railways, and air services. Given its long coastline of approximately 7 517 km, India has a hub of over 150 seaports with inland water transport playing a small supplementary role in a few states.

Transport plays a significant role in the overall development of a nation?s economy. In the past decade, the Indian economy has undergone many structural changes leading to decline of the share of the primary sectors (agriculture, forestry, and fishing) and increase in the share of the non-primary sectors (transport, communications, financing, manufacturing, etc.). Transportation being a derived demand, arising out of a need to fulfill other means, is significantly influenced by such structural changes in the economy. The contribution to GDP (gross domestic product), of the transport sector (including transportation, communications, trade and hotels) in 1993/94, was 411 billion rupees (at 1993/94 prices) and escalated to 794 billion rupees in 2003/04 (Central Statistics Office, 2005). Also the largest contributor to GDP in the transport sector in 2003/04 was road transport with a share of almost 62%.

In India transport demand, usually measured in passenger-km and freight-km, is increasing somewhat faster than the GDP. According to a World Bank study, India?s economy grew by 6% to 7% a year during the 1990s, and total transport demand grew by about 10% a year.

The transport modes vary in their infrastructural requirements, carrying capacities, capital and operating costs, energy consumption, and environmental impacts. In the last three decades, owing to easy accessibility, flexibility, and reliability, the share of both freight and passenger traffic has experienced a rapid shift from rail to road. However, the capacity of the road has not been able to keep pace with the increasing demand. In terms of rail-road modal mixes, the freight traffic carried by road transport is estimated to have increased from roughly 35% in 1970/71 to 70% in 2003/04 whereas the passenger traffic has increased from 67% to 85% during the same period. The NTPC (National Transport Policy Committee) set up by the Planning Commission in 1978 had advocated a 72% share to rail and 28% to road for freight transport on the basis of resource costs, break-even points, and fuel costs by the year 2000 (Planning Commission, 1980). Similarly, in the case of passenger transport the recommendation was to adopt specific measures to encourage diversion of traffic from personalized modes of motor transport to public transport system. Yet, the share of rail transport in freight movement continues to decline, which has enormous implications for fuel consumption.

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