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Economy bears burden as goods trains travel light

 Labourers load salt bags onto trucks from goods train, during the ongoing COVID-19 nationwide lockdown, in New Delhi. (PTI)Premium
Labourers load salt bags onto trucks from goods train, during the ongoing COVID-19 nationwide lockdown, in New Delhi. (PTI)

  • Railway freight statistics are a good indicator of the overall state of an economy. In April, the amount of freight moved by Indian Railways was 65.4 million tonnes, down 35.3% from a year ago. Mint explains India’s economic story in a world battered by the covid-19 pandemic.

Railway freight statistics are a good indicator of the overall state of an economy. In April, the amount of freight moved by Indian Railways was 65.4 million tonnes, down 35.3% from a year ago. Mint explains India’s economic story in a world battered by the covid-19 pandemic.

What’s rail freight got to do with economy?

Indian Railways moves different commodities such as coal, steel, petroleum, foodgrains and cement across the country. The total amount of commodities moved indicates the state of economic activity, or the lack of it, as is the case currently. Unlike gross domestic product data, published once every three months, railway freight data is released every month and can be used as a quick indicator to gauge the state of the economy. In April, overall movement of freight fell 35.3%, after dropping 13.9% in March. This clearly shows the depressed economic activity during the lockdown.

What does rail freight mainly transport?

Over the years, coal has formed around half of the total amount of commodities moved by the Railways. In April, the movement of coal fell 34.5% to 34.6 million tonnes, after falling 14.4% in March. This indicates that most factories and companies have been shut over the last few weeks and, thus, don’t need electricity. Given the bulk of the power produced in India is thermal, this translates into lower demand for coal and, hence, lower movement of coal by the Railways. Most state electricity boards/discoms price industrial power at a higher rate to subsidize power supplied to households. This formula is not working now.

Off the track.
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Off the track.

What’s the implication of this formula not working?

Lack of industrial power demand means discoms are not making enough money to pay power producers. As power producers are deep in debt, lack of payments means they will be unable to continue repaying their bank loans. This creates problems for banks, which are already in trouble. Banks getting into trouble eventually means trouble for the government.

What about transport of other commodities?

The transport of petroleum products by rail was down 35.6% to 2.3 million tonnes in April. This explains the lack of demand for petrol and diesel, with vehicles not plying due to the lockdown. It also explains the Centre’s steep hike of excise duty on petrol and diesel and state governments’ move to raise the sales tax on these fuels. Cement movement was down 90.6% to 0.86 million tonnes. This tells us that construction activity has come to a standstill, indicating why many migrant workers are queuing up to go home.

Why did movement of foodgrains jump then?

The movement of foodgrains during April soared 135.5% to 6.2 million tonnes. This was primarily on account of the distribution of extra foodgrains decided upon by the central government. Grains had to be moved from surplus states to deficient ones. In the months ahead, it might be a good idea to keep track of revenue-earning railway freight and which way it is headed to get an overall feel of the level of economic activity in India.

Vivek Kaul is a Mumbai-based economist.

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