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Decoding Slowdown: State of transport of goods shows a marked decline

Decadal comparisons of growth in railway freight, consumption of diesel and import of crude oil and its products - all point to significant decline, indicating that the economic slowdown is neither sudden nor cyclical

Decoding Slowdown: State of transport of goods shows a marked decline

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The slowdown in the Indian economy has been long in the making, contrary to what many may say or what the sudden slump in the number of trucks sold in the recent months may point to. There are other indicators of the state of surface transport of goods that show there has been a sharp fall in growth in the current decade compared to the previous one.

The implication of a long term slowdown is that it is structural in nature, the early signs of which were either unnoticed or unaddressed and now it requires long term solutions. There is no place for shortcuts or quick fixes any more.

Decline in railway freights

The freight carried by the Indian Railways is as good an indicator as any of the health of the economy.

The Indian Railways uses two indices to map the volume of goods traffic it handles: revenue earning freight loading (originating in all railways), measured in million ton (MT), and revenue earning freight carried over a distance, measured in billion (1000 million) ton kilometre (BTK).

The Economic Survey of 2018-19 provides such data from 1950-51 till 2018-19 (provisional). Three reference points are relevant for the present purpose - 2000-01, 2011-12 and 2018-19.

The year 2000-01 marks the beginning of the previous decade, 2011-12 the beginning of the current decade (data for 2010-11 is missing) and 2018-19, the last fiscal.

The freight loading recorded in 2000-01 was 473.5 MT, which grew up to 969.1 MT in 2011-12 and ended at 1221.39 MT in 2018-19.

Thus, the freight loading grew by 104.67% between 2000-01 and 2011-12 - that is a simple annual average growth of 8.7% in 12 years.

But in the current decade, it grew by only 26.03% between 2011-12 and 2018-19 - that is a simple annual average growth of 3.25% in eight years.

Similarly, freight carried in 2000-01 was 312.4 BTK, which grew to 667.6 BTK in 2011-12 and 700.6 BTK in 2018-19. Notice how freight carried remained virtually stagnant between 2011-12 (667.6 BTK) and 2018-19 (700.6 BTK).

This means, while growth rate in the previous decade between 2000-01 and 2011-12 was an impressive 113.7% (or a simple annual average of 9.47%) over a 12-year period, the same for 2011-12 to 2018-19 period was a mere 4.9% (or a simple annual average growth of 0.69%) over the eight years.

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Decline in consumption of high speed diesel (HSD) 

Another good indicator is consumption of high speed diesel (HSD) used by trucks carrying goods. The database maintained by the Petroleum Planning and Analysis Cell of the Ministry of Petroleum and Natural Gas shows the growth in consumption of HSD falling considerably in recent years.

In the eight years of this decade, from 2011-12 to 2018-19, the HSD consumption grew from 64.75 MT to 83.52 MT - a growth of 29% in eight years or a 3.6% of simple annual average growth.

But in the corresponding eight years of the previous decade, from 2001-02 to 2008-09, the HSD consumption grew from 36.5 MT to 51.7 MT - a growth of 41.5% in eight years or 5.2% of simple average annual growth.

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A lower growth rate in the consumption of HSD during a time when India witnessed a huge surge in the sale of diesel cars indicate that the use of diesel in transportation of goods could be much lower than what the overall consumption figure would suggest - compared to the previous decade.

Decline in import of crude oil and products

Import of crude oil and products also provide a good indication of the health of an economy. The basket of crude oil and product include diesel, LPG, naptha, aviation turbine fuel (ATF), lube oil and many others which respond to India's energy needs.

The Petroleum Planning and Analysis Cell data shows in eight years of this decade, from 2011-12 to 2018-19, India's total import went up from 187.58 MT to 259.17 MT - a growth of 38.17% or a simple annual average growth of 4.8%.

In sharp contrast, during the corresponding years in the previous decade, India's import of crude oil and products went up from 85.72 MT in 2001-02 to 151.36 MT in 2008-09 - a growth of 76.58% or a simple annual average growth of 9.6%.

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When the annual growth in the current decade is tracked, it is seen that after hitting a high of 10.2% growth in 2015-16, there has been a sharp fall to 1.3% in 2018-19.

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