The Indian Economy Blog

July 22, 2005

IRTS — Part 2

Filed under: Infrastructure — Atanu Dey @ 2:04 am

Make no little plans. They have no magic to stir men’s blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistency. Remember that our sons and grandsons are going to do things that would stagger us. Let your watchword be order and your beacon beauty. Think big.

Daniel Burnham, Chicago architect. (1864-1912)

Story goes that there lived a man who was of modest means. He had banana trees in his backyard which provided him with a supply of broad leaves. He would harvest them to use as disposable plates to have his meals on, as is the custom in many coastal regions of India. To save the green leaves for using at a later date, he would carefully choose the yellow decaying leaves to have his dinner on. Forever trying to save the green leaves, he spent his entire life eating on yellow leaves. A foolish prudence, born out of not recognizing that green leaves cannot be saved from turning yellow, resulted in a self-imposed needlessly impoverished life.

Savings are important as a means but not as an end. They have to be invested in endeavors that increase productive capacity so as to increase future stream of goods available for consumption. Of course, lending one’s savings for others to consume or invest in their productive enterprises is not as bad as letting the saving rot in your backyard. But it is best to save and invest those savings in your own home where it will do you the most good, especially if those savings are for projects that have an “inevitability” about them. Indeed, when it comes to “inevitable projects,” it may even be wise to borrow if needed than to put off implementing them with the notion that you would do them tomorrow. There are two reasons: first, putting them off may reduce your present productive capacity and therefore your present income will be lower (and so will the future stream of income.) Second, in the future the cost of implementing the project will be more.

There are many “inevitable projects” that the Indian economy needs. Three critical ones are (1) universal primary literacy and education, (2) solar energy, and (3) an integrated transportation system. They are all critical for number of reasons which I will go into later. For the moment, I will focus on the last because it will illustrate what I mean by “inevitability.” This is a continuation of my piece on the “Intergated Rail Transportation System.”

Inevitability

We cannot get away from confronting these facts. India is a very large country of over a billion people, soon to be the most populous country. India is also extremely poor. When we say poor, we mean that compared to the number of people, the amount of goods and services the people produce is on average very low. We produce too little. Most of what we produce, we have to consume just to keep body and soul together. And in that too we fail miserably evidenced by the fact that half of our children below five are malnourished.

This suggests that we can either increase our production, or reduce our population, or both. Increasing our production implies either using more productive resources, or using our productive resources more efficiently, or both. An efficient transportation system is not an optional item. Without one, the economy cannot achieve productive efficiency.

The transportation system of an economy as geographically large, as densely populated, and as resource constrained as India’s, has to have as its backbone a rail transportation system.

Roads transportation is not an option for India for a number of obvious reasons. Cars and fossil fuels are expensive. Very efficient alternative fuel cars are even more expensive. With 17 percent of the world’s population and 2 percent of the world’s land area, we cannot afford the luxury of high speed expressways the way that the US can. We have to be more fuel efficient than the US because it is not even theoretically possible to emulate the US with its automobile/airlines system. The US appropriates approximately a quarter of the world’s total energy use with only about five percent of the world’s population. To reach US standards of energy use per capita, India would have to increase its energy consumption 25-fold. (NOTE: all figures in this piece are approximate. The exact figures will not substantially alter the argument.) To put it another way, India would have to use four times the total amount of energy currently consumed by the entire world. At present, India has to import over half of its fossil fuel needs and pays an unaffordable amount for it. India’s economy cannot be sustained on imported fuel. From here flows the case for solar energy, which we will not dwell on right now.

The same argument as above applies with even greater force when air transport is considered as the backbone of an efficient transportation system. Only a very insignificant percentage of Indians can afford to fly. By afford I do not merely mean individual capacity to pay. You cannot have 75,000 daily flights serving Indians, which is what you would need to match the US’s air transportation system.

A bit of arithmetic is all that is needed to expose the underlying reality that we don’t have the option of having road or air as the backbone of India’s transportation system. We not only cannot afford the fuel (source constraint), but we cannot also afford the pollution (sink constraint) of 700 million cars and 20,000 airliners spewing exhaust — as would be required to match the US on a per capita basis.

I should add that I am making a comparison with the US for a very specific reason. It lies at the other extreme end of the spectrum of per capita resource use. We cannot go there even if we wanted to. So all arguments that I have heard about air transportation becoming more affordable in India do not amount to a hill of beans because simple arithmetic puts them out of the running.

India has a rail transportation system. It is the third largest. Or something like that. It is very large. Actually, when you talk about India, you encounter large numbers. By themselves they don’t mean much, of course. You have to put the number in perspective. India is the largest producer of milk, goes the boast. Impressive until you normalize the figure by dividing by the total population. True, India produces 30 times the milk that Denmark produces but then it has 300 times the population of Denmark. True, that India has a large rail network (40,000 miles) but then India has 1,103,048,634 people.

(Aside: If only, lord, if only people will learn how to use normalized numbers instead of raw numbers — it will save us from a lot of foolish bluster.)

7 Comments »

  1. Good blog that you have got here folks! All the best..

    Atanu,

    When you talk about “Too expensive” and “People can’t afford it” as objections to your idea, you dismiss them as if they are not relevant. If an IRTS is built, but the ticket prices are too expensive and people do not buy tickets (because they cannot afford it), then the system is doomed to failure. This is not a fear of large projects or socialist thinking – the project must be financially justifiable. Who pays for what and how much should be clarified in your next post. If you want the government to pay for it (this being a public good), we should also remind ourselves of all that can go wrong with that.

    Comment by Eswaran — July 22, 2005 @ 3:18 pm

  2. Hi Atanu
    Eswaran has a valid point: this has to pay for itself, and we don’t really know if it would. Faster trains will probably be much more expensive. It might be nice if you could have faster trains for the new middle class of India and slower ones for the poorer people, but obviously you cannot have them running on the same track. So it raises an interesting question: if the trains ran twice as fast but cost four times as much to ride, is it worth it to the average Indian?

    Comment by Michael H. — July 22, 2005 @ 8:10 pm

  3. Two things: big nations rarely have very high speed trains. In the US, unless I am mistaken most trains travel at 60 mph or almost 100 kmph, not much higher than that. Moreover the cost of travelling by train over a given distance is almost the same as travelling by flight, both having their inherent advantages and disadvantages.

    The Bullet and TGV are the glory of smaller nations like Japan and France respectively. In fact the US does not even have the best highways in the world, with rarely a road that does not have an upper speed limit, unlike Germany or nations in the Middle East.

    The Indian government is taking the view that the average speed of trains needs to be improved for freight, where it is currently a princely 22 kmph. Accordingly a high speed freight corridor is being worked on with Japanese help. This would be laid along the Golden Quadrilateral. But yes, passenger trains can also increase in speed.

    For the Chennai-Delhi route for instance, flights would still remain the best option.

    Comment by Kiran — July 24, 2005 @ 9:26 am

  4. If we are to have better rail, we should be thinking about competing in an open market. What use is it for us to sell services for peanuts when we have tigers to feed?

    Most Indians are now demanding better wages or they walk. So why not put pressure on the industry at a govenment level and get some money out of our IT and outsourcing industries whilst we can, and whilst it will do some good for India. As you say yourself, what use is our I.T. Industry when it all moves to China. Most blogs point out the fact that India is getting les of the outsource work, yet we invest in more I.T. Education. I.T. does not grow food, does not move people does not do much for India, it is only to be American slaves that the Industry exists.

    I say its time the Industry paid its way, time the Taxes were raised and time India got a backbone again.

    That is unless you are like the monkey and like peanut, or like the American and like yellow leaves.

    You only get one life friend.

    Comment by Vkay — July 25, 2005 @ 6:47 pm

  5. the fact that none of the four readers above had chosen to comment on the very first item on your list is, what shall i say, telling. and your postponing your own views on the issue seems to indicate the general consensus on what’s needed ( and can be delayed).
    in my view it’s ‘inevitable’ that india educate all its people now,in order to avoid the largest number of potential speedbreakers on its path to true ‘superpowerdom’, later.

    Comment by kuffir — August 15, 2005 @ 4:06 pm

  6. The need for creation of social and physical infrastructure is undeniable. However, i would tend to agree on greater government effort only on the first 2 issues – education and more sustainable sources of energy.

    There are many facets of rail transportation that need to be improved before going in for any more massive keynesian projects. The very first is that prices have to be responsive to the market, which means increasing passenger fares and reducing freight rates. The money gained by the increase in passenger fares should ideally be put into creation of greater infrastructure, most importnat of which is digital signalling systems to increase the safety of rail networks.

    Unnecessary roadblocks to creation of better airport infrastructure should be removed.

    The administered market in fuels should be replaced by a free market. Remove cross-subsidy. Let people buy petrol and diesel from anywhere in the world. This will raise the diesel price again, thus giving advantage to rails.

    Comment by Prakash — August 17, 2005 @ 4:25 pm

  7. I am not sure if we need trains that go faster, I am more of the opinion that the railways needs to cut out unnecessary stops.

    For example the average time from Bangalore to Mysore by Rail is 3 hours. But by cutting out most unnecessary stops one train does it in 2 hours and 20 minutes(including mandatory slowing down at all junctions/stations) . The fact is, most folks travel from Bangalore to Mysore, not to all those intermediate stops that are encountered.

    As much as the railways should plan for higher loads and speeds(which might reflect 10, 20 years down the line), there is a crying need for efficient utilization of current resources, to serve immediate needs!

    Comment by Prasanna — November 7, 2005 @ 6:02 pm

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