Railways in Colonial India: An Economic Achievement?

39 Pages Posted: 3 Jun 2012 Last revised: 19 Jun 2012

See all articles by Dan Bogart

Dan Bogart

University of California, Irvine - Department of Economics

Latika Chaudhary

Naval Postgraduate School

Date Written: May 1, 2012

Abstract

This chapter reviews the economic performance of Indian railways in particular the development and organization of the network, the trends in railway performance, the effects of ownership and regulatory policies, and the impact of railways on the Indian economy. We highlight four main points. First, the Government of India had a strong influence on railways from the beginning, but the Government’s role increased as railways were gradually nationalized over time. Second, the performance of Indian railways can be classified into two periods: pre-1920 and post-1920. There was a trend to higher output, productivity, and profits between 1850 and 1919, but after 1920 there was a leveling off. Fares and freight charges exhibit similar patterns, declining from 1850 to 1919 and then rising somewhat until 1940. Third, dividend guarantees were a key feature of the early era of private ownership. We argue that guarantees weakened incentives to lower costs, but they also encouraged rapid railway development. We review the relationship between Government of India ownership and operating efficiency. Perhaps surprisingly we find that state ownership reduced operational costs. Finally, there is clear evidence that railways increased market integration and raised incomes, but the magnitude of the effect and the precise mechanisms are still in doubt.

Keywords: Colonial India, railways, state ownership, productivity, social savings

JEL Classification: N45, N75, O14, L5, L92

Suggested Citation

Bogart, Dan and Chaudhary, Latika, Railways in Colonial India: An Economic Achievement? (May 1, 2012). Available at SSRN: https://ssrn.com/abstract=2073256 or http://dx.doi.org/10.2139/ssrn.2073256

Dan Bogart

University of California, Irvine - Department of Economics ( email )

Campus Drive
Irvine, CA 62697-3125
United States

Latika Chaudhary (Contact Author)

Naval Postgraduate School ( email )

1 University Circle
Monterey, CA 93043
United States

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