We continue to maintain a bullish outlook with regards to India's freight transport sector. The country's rapid economic growth, and attendant expansion in its middle class and consumer market, is feeding rapid growth in throughput at the country's ports which is filtering down into the rest of the freight transport network. A number of new maritime terminals are being developed in order to cater for this, in addition to the expansion of existing terminals. The Indian air freight sector is equally buoyant, though continues to suffer from bottlenecks and strikes. The country's road and rail freight sectors remain overstretched due to the country's growing trade demands and a lack of investment by previous governments. However, attempts to increase capacity across these sectors are currently taking place.
Headline Industry Data
?? 2011 port JNPT tonnage throughput growth forecast is 9.2% and is expected to average 11.6% a year to 2015.
?? 2011 rail freight tonnes/km growth forecast is 4.6% and is expected to average 6.2% to 2015.
?? 2011 air freight tonnes growth forecast is 5.9% and is expected to average 7.5% to 2015.
?? 2011 total trade real growth forecast at 11.3%.
Key Industry Trends
Air Cargo Volumes Trending Upwards India's rapidly expanding consumer base is also having a positive effect on airfreight volumes across the country. India's bellwether airfreight terminal Mumbai airport posted a 13% increase in cargo to 44mn tonnes from April 2010 to March 2011 despite bottlenecks and strikes. The airport handled 44mn tonnes of international cargo last year. 'For April 2010-March 2011, the volume growth is 13% over the same period last year at CSIA. The volume growth for MIAL as custodian is 32%,' said a Mumbai International Airport Limited (MIAL) spokesperson. MIAL handles about 70% of the airport's cargo throughput, with Air India handling the other 30%.
Government Driving Rail Expansion In April 2011 state-owned Indian Railways secured a INR300bn (US$6.64bn) loan for its western freight corridor connection from Mumbai to Delhi. The project involves building nine large industrial zones, high-speed freight line, three ports, six airports and an expressway connecting the two cities. The project is expected to be completed by 2017. The announcement followed news of the company's reported 3.64% rise in revenue earning freight between April 2010 and February 2011, having transported 832.75mn tonnes during the period. In February 2011, the company moved 76.8mn tonnes of revenue earning freight, indicating a y-o-y increase of 5.87%.
ADB Investment To Aid Much-Needed Repair Of Road Network We have previously highlighted that India's growing economy and population will put significant pressure on India's transport sector, as the number of vehicles on the road continues to grow rapidly. This will result in a further deterioration of traffic conditions in India's major cities over time. A series of recent developments in India's road sector are expected to go some way to offsetting this decline. In May 2011, the Asian Development Bank (ADB) announced its decision to provide INR13.5bn (US$299.5mn) for a road construction project in India. The project, which has now been approved by the national government, involves the construction and upgrade of 433km of roads and will take place between 2011 and 2016.
Port Sector Draws In Overseas Investment India's port sector remains an attractive destination for investment and Q211 was no exception. India's impressive economic growth is fuelling the rapid development of the country's container ports in particular, as income levels and demand for consumer goods expands. In April, it was reported that APM Terminals (APMT), the terminals-operating arm of Danish shipping and oil and gas conglomerate AP Moller Maersk, had signed an agreement to set up a container-handling facility at the new private Indian port of Dhamra, located in the north-east of the country. The contract for the port was granted in 2004 by the state of Orissa to the Dhamra Port Company, a joint venture (JV) between Tata Steel and L&T, on a build, own, operate, share and transfer basis for 34 years, including four years for the construction of the port.
Key Risks To Outlook
Despite the recent inflow of investment into India's transport network, congestion and bottlenecks remain major obstacles across the country's various freight modes. These disruptions present downside risks to our forecasts with sea and airports, in particular, continuing to suffer severe disruptions during periods of peak demand.
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