HP Summer Intern Application

Case Study: FDI to GDP

Presented by:
Tanvi Bagaria
Shubhodhay Redd
Kumar Niket

Problems associated with railways sector

Network
congestion

Ceding of
freight traffic
to roads

Social burden

Slowdown in
revenue
growth

Staff wages
and increase
in lease

Same network is used by both passenger trains and freight trains with priority
given to passenger trains
Reduces network productivity

Modal share in freight traffic has declined to around 33 per cent in 2011, and
estimated to decline further to 25 per cent by 2020
Leads to increased private costs in terms of greater congestion, pollution

Railways is the public transport of India and to make it affordable concessions

are given to certain sections of commuters
This reduces the revenue that railways could otherwise have earned

Due to low quality of services and low reliability revenue growth has registered
a slowdown
Railways is becoming the transporter of bulk commodities and is losing to
national highways which run parallel to railways
Staff wages is increasing consistently putting tremendous strain on the
financial resources of railways
Market borrowing started in 1986 and the trend is increasing and at present
lease charges contribute around 8.5% of revenues

Impact of FDI in Railways on GDP

GDP
Contributors

Services (53)

Manufacturing
(30)

Agriculture
(17)

Transport,
Storage &
Comm. (6.7)

Community
and Social
Services (13.4)

Financial, Real
Estate services
(20.5)

Railway
s (0.80)
Passenger
Upper
Class

Trade, Repair,
Hotels (12.4)

Others
(5.9)

Passenger
Second
Class

Other
Coaching

Freight

Sundry

Misc

Revenue
Making
Options

Analysis of FDI Contribution :

FDI inflow into Railways and all related projects from April, 2000 till May, 2015 is 0.30 % of total FDI
So from given FDI inflow of $34.9bn, amount contributed to Railways will be approx. $105mn (Rs 700cr)
Operating ratio(x) is defined as the amount x need to be spent to obtain $1. From the graph, OR trend shows it is .925
Railways revenue would be generated from Budget allocation and FDI inflow which are $21000mn and $105mn
respectively
0.80% of GDP is contributed by $21105mn. Estimate $1 of investment would impact

Macroeconomic Aspects Influencing

the GDP
Evaluate the number of new projects started in the railways sector
Number of job opportunities created
Calculate the percentage increase in the wages
Increased wages leads to more spending and economic growth
Before FDI

After FDI

Sectors in GDP
32
15

17
13
23

Share in GDP
Sector A
Sector B
Sector C
Sector D
Sector E

25
17

16
15
25

Sector A
Sector B
Sector C
Sector D
Sector E

Contents
Contributors
Issues in Railway
Tanvi Bagaria
Sector
Impact of FDI in
Railways on GDP

Shubhodhay,
Niket

Macro Economic
Aspects

Shubhodhay,
Niket

Thank You