Significance Of Transportation

& Its Contribution To Economy

Presented by

Sunil Raut,
Subhendu Biswal
Subhasis Rout
Sunil Sahoo
Vinay Soni
 Vysakh
 What is Transportation ?
Transport (British English) or transportation (American
English) is the movement of people and goods from one
place to another. The term is derived from the Latin trans
("across") and portare ("to carry").

From the beginning of history, human sensitivity has

revealed an urge for mobility leading to a measure of
Society's progress. The history of this mobility or
transport is the history of civilization.
 Significance Of Transportation

1.Transport contributes in Growth of industries

whose product requires quick marketing.
Perishable articles like fish and green vegetables are
carried to various consumers quickly even in distant
markets through transport.

2.Transport helps in increase in the demand for

goods. Through transport newer customers in
newer places can be easily contacted and products
can be introduced to them. Today markets have
become national or international only because of
transport.
3.Transport creates place utility. Geographical
and climatic factors force industries to be
located in particular places far away from the
markets and places where there may not be any
demand for the products. Transport bridges the
gap between production and consumption
centers.
4.Transport creates time utility. Of late
transport has started creating the time utility
also. It has been made possible by virtue of the
improvements in the speed of transport. It helps
the product to be distributed in the minimum
possible time.
5.Transport helps in stabilization of price.
Transport exerts considerable influence upon
the stabilization of the prices of several
commodities by moving commodities from
surplus to deficit areas. This equalizes the
supply and demand factors and makes the price
of commodities stable as well as equal.

6.Transport ensures even flow of commodities

into the hands of the consumers through out
the period of consumption.
7.Transport enables the consumers to enjoy
the benefits of goods not produced locally. This
increases the standard of living, an essential
factor for further development of marketing and
economy.

8.Transport identifies competition, which in

turn, reduces price. Prices are also reduced
because of the facilities offered by transport for
large-scale production. Advantages of large-
scale production is possible only due to
transport.
9.Transport increases mobility of labor and
capital. It makes people of one place migrate to
other places in search of jobs. Even capital,
machineries and equipments are imported from
foreign countries through transport alone.

10.Bring countries closer : No country in the

world is self-sufficient. They have to depend on
one another to fulfill their requirements.
Transportation has brought the countries closer.
It not only caters to the need of mobility but
also provides comfort and convenience.
11. Creates employment: Transport also
contributes to economic development through
job creation. It creates both direct and indirect
employment opportunities. In India, a sizeable
portion of the country’s working population is
directly or indirectly employed in the transport
sector.

It also facilitates movement of labors and

thereby encourages employment resulting into
industrial development and thereby economic
development.
•
12. Serve several purposes:
Transportation provides access to natural
resources and promotes trade, allowing a nation
to accumulate wealth and power. Transportation
also allows the movement of soldiers,
equipment, and supplies during war.
Hence transportation is vital to a nation’s
economy as it serve several purposes. It includes
the manufacture and distribution of vehicles,
the production and distribution of fuel, and the
provision of transportation services.
Transportation & Logistics
 Freight Transport Market in India
2015 - 2020
India spends around 14.4% of its GDP on logistics
and transportation as compared to less than 8%
spent by the other developing countries.
Indian freight transport market is expected to grow
at a CAGR of 13.35% by 2020 driven by the growth
in the manufacturing, retail, FMCG and e-commerce
sectors.
Freight transport market in India is expected to be
worth US$ 307.70 billion by 2020.
Road Freight Transport

In India road freight constitutes around 63% of the total

freight movement consisting of 2.2 million heavy duty
trucks and 0.6 million light duty trucks covering more
than 18,00,000 kms of road length carrying more than
3000MMT (million metric ton) of load annually.

NOVONOUS estimates that the road freight movement

is expected to increase at a CAGR of 15%. This will be
driven by the growth in Indian FMCG, retail and
pharmaceutical sectors, which have large freight
transport requirements across the country which is
generally done by road transportation.
Rail Freight Transport

The rail freight constitutes around 27% of the total

freight movement in India. It consists of a large
infrastructure of more than 65000 kms of rail network
carrying more than 1400MMT of load annually. With
the growth in core manufacturing sector and with the
proposed “Make in India” campaigns it is expected that
the freight movement of core commodities like iron
ore, steel, coal, petroleum etc are projected to increase
at a fast pace.

NOVONOUS estimates that Indian rail freight market

will grow at a rate of around 10% CAGR over the next 5
years.
Sea Freight Transport

In India the sea freight consists of around 9% of the

total freight market and is mainly used as a major mode
for imports and exports. Around 600MMT of freight
tonnage is transported through the 13 major ports and
the 200 minor ports of India.

NOVONOUS estimates that Indian sea freight market

will grow at a CAGR of 12% in the next 5 years, which
will be mainly driven by increased exports of
automobiles and handloom & handicraft products.
Air Freight Transport
The air freight consists of around 1% of the total
freight market in India and approximately 4 MMT of
freight tonnage is transported through air.

NOVONOUS estimates that Indian air freight market

will grow at an impressive rate of around 12.5%
CAGR over the next 5 years with more number of
private airlines entering this space coupled with the
lower turnaround time needed for delivery such as
“24 hour delivery” needed by the E-commerce
sector.
 The Economic Importance of
Transportation
• The transportation sector moves goods and
people, employs millions of workers, generates
revenue, and consumes materials and services
produced by other sectors of the economy.
• Good transport network is crucial for sustained
economic growth and development of a nation.
This vital infrastructure is regarded as an
important determinant for the success of a
nation’s effort in diversifying its production base,
expanding trade and linking together resources
and markets into an integrated economy.
At the macroeconomic level (the importance of transportation
for a whole economy), transportation and the mobility it confers
are linked to a level of output , employment and income within a
national economy. In many developed countries,
transportation accounts between 6% and 12% GDP.

At the microeconomic level (the importance of transportation

for specific parts of the economy) transportation is linked to
producer, consumer and production costs . The importance of
specific transport activities and infrastructure can thus be
assessed for each sector of the economy.

Transportation accounts on average between 10% and 15% of

household expenditures while it accounts around 4% of the costs
of each unit of output in manufacturing.
 Economic regulation
The transportation sector is often regulated in order to bring it in
conformity with economic priorities. Unless people and goods move
from place to place, economic activity cannot take place.

There are basically four ingredients in economic regulation, viz. fare

regulation, entry regulation, quality of service regulation and tax
regulation.
• Fare regulation- In order to ensure even spread of transportation it is
necessary for the government to regulate fares so that passengers
are not exploited and at the same time economic viability of the
operators is not jeopardized.

• Entry regulation- regulation in choosing the most qualified candidate

to enter the transportation industry.
• Quality of service regulation- To ensure an efficient, adequate and
properly coordinated transport service, it is essential to create a
professionally competent cadre of regulatory officials. Beginning with
the issue of operating licenses and supervision, the regulatory
mechanism should encourage the setting up of appropriate training
institutions to improve driving and operating skills in the interest of
improving service and ensuring safety

• Tax regulation - The tax structure should foster development of

transportation by using the revenues to improve terminal facilities, to
evolve safety and environmental standards and to enable growth.

 Goals of regulation
 Protection of public interest
 Transport as a viable business to attract better manufacturers
and operators
 Supporting national and strategic interests.
 Production
• Optimized Production
Locations
• Lower Production
Cost
• Lower Inventory
Levels

Improved Transportation Economic Benefits

Infrastructure • Lower Prices
• Greater Speed • More Product Variety
• More Reliability • Economic Growth and
• Lower Transportation Cost Efficiency

Distribution
• Optimized Distribution
Network
• Lower Inventory Levels
• Lower Distribution
Cost
 GDP Contribution
• India’s transport sector is large and diverse; it
caters to the needs of 1.1 billion people.
• Transport sector accounts for a share of
6.4 per cent in India’s Gross Domestic
Product (GDP). Road transport has
emerged as the dominant segment in
India’s transportation sector with a share of
5.4 per cent in India’s GDP.
 Conclusion
It is necessary to foster the development of the
various transport modes in an integrated manner
that will lead to the realization of an efficient,
sustainable, safe, and regionally balanced
transportation system, where each mode of transport
operates in its field of economy and usefulness, with
competitive and nondiscriminatory prices that are
adequate to support progressive development of
transport infrastructure and services. This would also
enable the comparative advantages and economic
efficiencies to be properly reflected in the user costs.
Thank You
Any questions ?