In India, road transport is a key component for economic growth. Besides connecting production and consumption, roads and highways also open up new markets by gaining access to new customers. Roads and highways are always a preferable choice of transport in India with its more than 4 million kilometres of network (second largest network in the world).

Yet the length of Indian national and state highways is almost 226,000 kilometres which makes up a mere 5.5% of India’s total road network. There’s lot more attention needed for the development of roads in semi urban and developed rural areas of the country. Also the length of total national and state highways has grown 4% p.a. for the last five years compared to a huge growth of 22% p.a. in passenger vehicles in the same period.

India spends nearly 13% of total GDP on transport activities, which is higher than other developed and developing countries. Major reasons for this include relatively low transport speeds and high cost of administrative delays. Demand for improved traffic systems has increased thanks to this rapid growth in personal vehicle ownership. Such pressures have forced the government to rethink its strategy for road development projects, for example:

  • Government has almost doubled the infrastructure budget to US $1,025bn in the twelfth five-year plan (2012-17) (compared to US $514bn in the eleventh five-year plan)
  • 100 percent FDI (Foreign Direct Investment) under the automatic route is now permitted
  • 100 percent income tax exemption for a period of 10 years
  • Government financial agencies to provide funding up to 20 percent of project costs
  • Increasing lane sizes of all major highways and corridors

Some solutions for transport improvement can be provided through technology. Intelligent transport systems (ITS) are playing a vital role in meeting these emerging requirements, although the adoption rates of such system are low in India compared to other emerging countries. In the last two years this sector has adopted many technologies such as radio frequency identification (RFID), transport management system (TMS), warehouse management, ERP, CRM, SCM, cloud, mobility, for better service, increased efficiency and customer experience. All these have a role to play.

TMS and ITS are the most obvious, and are gaining market share in terms of adoption. But deployment of CRM, ERP and freight management are also significant. With Indian government’s future plans for improved vehicle tracking and more cashless toll collection, the demand for these, together with RFID, will improve. Also there are plans to have advanced vehicle safety system and seamless intelligent transport system which will increase demand for enhanced data center to manage and record the increased flow of information and new technologies in the areas of safety and security.

PAC View:

PAC believes that technology adoption in this sector will further increase due to the ongoing infrastructure development in this country. However, the next phase of growth will mainly depend on development in other major and district level roads (makes up almost 61% of total road network) primarily spread across tier-III to tier-V locations. Also, the emergence of domestic and foreign private players in this area has enhanced development speed. This has increased the competition in this sector and funding from both public and private sectors is set to increase sharply in near future which will increase IT spending from this sector.

Post by Biswajit Banerjee