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Significance Of Transportation & Its Contribution To Economy

Significance of transportation

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Page 1: Significance of transportation

Significance Of Transportation & Its Contribution To Economy

Page 2: Significance of transportation

Presented by

Sunil Raut,Subhendu Biswal

Subhasis RoutSunil SahooVinay Soni

Vysakh

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What is Transportation ?

Transport (British English) or transportation (American English) is the movement of people and goods from one place to

another. The term is derived from the Latin trans ("across") and portare ("to carry").

From the beginning of history, human sensitivity has revealed an urge for mobility leading to a measure of

Society's progress. The history of this mobility or transport is the history of civilization.

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Significance Of Transportation

1. Transport contributes in Growth of industries whose product requires quick marketing. Perishable articles like fish and green vegetables are carried to various consumers quickly even in distant markets through transport.

2. Transport helps in increase in the demand for goods. Through transport newer customers in newer places can be easily contacted and products can be introduced to them. Today markets have become national or international only because of transport.

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3. Transport creates place utility. Geographical and climatic factors force industries to be located in particular places far away from the markets and places where there may not be any demand for the products. Transport bridges the gap between production and consumption centers.4. Transport creates time utility. Of late transport has started creating the time utility also. It has been made possible by virtue of the improvements in the speed of transport. It helps the product to be distributed in the minimum possible time.

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5. Transport helps in stabilization of price. Transport exerts considerable influence upon the stabilization of the prices of several commodities by moving commodities from surplus to deficit areas. This equalizes thesupply and demand factors and makes the price of commodities stable as well as equal.

6. Transport ensures even flow of commodities into the hands of the consumers through out the period of consumption.

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7. Transport enables the consumers to enjoy the benefits of goods not produced locally. This increases the standard of living, an essential factor for further development of marketing and economy.

8. Transport identifies competition, which in turn, reduces price. Prices are also reduced because of the facilities offered by transport for large-scale production. Advantages of large-scale production is possible only due totransport.

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9. Transport increases mobility of labor and capital. It makes people of one place migrate to other places in search of jobs. Even capital,machineries and equipments are imported from foreign countries through transport alone.

10. Bring countries closer : No country in the world is self-sufficient. They have to depend on one another to fulfill their requirements. Transportation has brought the countries closer. It not only caters to the need of mobility but also provides comfort and convenience.

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11. Creates employment: Transport also contributes to economic development through job creation. It creates both direct and indirect employment opportunities. In India, a sizeable portion of the country’s working population is directly or indirectly employed in the transport sector.

It also facilitates movement of labors and thereby encourages employment resulting into industrial development and thereby economic development.

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12. Serve several purposes: Transportation provides access to natural resources and promotes trade, allowing a nation to accumulate wealth and power. Transportation also allows the movement of soldiers, equipment, and supplies during war.Hence transportation is vital to a nation’s economy as it serve several purposes. It includes the manufacture and distribution of vehicles, the production and distribution of fuel, and the provision of transportation services.

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Transportation & Logistics

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Freight Transport Market in India 2015 - 2020

India spends around 14.4% of its GDP on logistics and transportation as compared to less than 8% spent by the other developing countries.

Indian freight transport market is expected to grow at a CAGR of 13.35% by 2020 driven by the growth in the manufacturing, retail, FMCG and e-commerce sectors.

Freight transport market in India is expected to be worth US$ 307.70 billion by 2020.

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Road Freight Transport

In India road freight constitutes around 63% of the total freight movement consisting of 2.2 million heavy duty trucks and 0.6 million light duty trucks covering more than 18,00,000 kms of road length carrying more than 3000MMT (million metric ton) of load annually.

NOVONOUS estimates that the road freight movement is expected to increase at a CAGR of 15%. This will be driven by the growth in Indian FMCG, retail and pharmaceutical sectors, which have large freight transport requirements across the country which is generally done by road transportation.

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Rail Freight Transport

The rail freight constitutes around 27% of the total freight movement in India. It consists of a large infrastructure of more than 65000 kms of rail network carrying more than 1400MMT of load annually. With the growth in core manufacturing sector and with the proposed “Make in India” campaigns it is expected that the freight movement of core commodities like iron ore, steel, coal, petroleum etc are projected to increase at a fast pace.

NOVONOUS estimates that Indian rail freight market will grow at a rate of around 10% CAGR over the next 5 years.

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Sea Freight Transport

In India the sea freight consists of around 9% of the total freight market and is mainly used as a major mode for imports and exports. Around 600MMT of freight tonnage is transported through the 13 major ports and the 200 minor ports of India.

NOVONOUS estimates that Indian sea freight market will grow at a CAGR of 12% in the next 5 years, which will be mainly driven by increased exports of automobiles and handloom & handicraft products.

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Air Freight Transport

The air freight consists of around 1% of the total freight market in India and approximately 4 MMT of freight tonnage is transported through air.

NOVONOUS estimates that Indian air freight market will grow at an impressive rate of around 12.5% CAGR over the next 5 years with more number of private airlines entering this space coupled with the lower turnaround time needed for delivery such as “24 hour delivery” needed by the E-commerce sector.

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The Economic Importance of Transportation

• The transportation sector moves goods and people, employs millions of workers, generates revenue, and consumes materials and services produced by other sectors of the economy.

• Good transport network is crucial for sustained economic growth and development of a nation. This vital infrastructure is regarded as an important determinant for the success of a nation’s effort in diversifying its production base, expanding trade and linking together resources and markets into an integrated economy.

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At the macroeconomic level (the importance of transportation for a whole economy), transportation and the mobility it confers are linked to a level of output , employment and income within a national economy. In many developed countries,transportation accounts between 6% and 12% GDP.

At the microeconomic level (the importance of transportation for specific parts of the economy) transportation is linked to producer, consumer and production costs . The importance of specific transport activities and infrastructure can thus be assessed for each sector of the economy.

Transportation accounts on average between 10% and 15% of household expenditures while it accounts around 4% of the costs of each unit of output in manufacturing.

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Economic regulationThe transportation sector is often regulated in order to bring it in conformity with economic priorities. Unless people and goods move from place to place, economic activity cannot take place.

There are basically four ingredients in economic regulation, viz. fare regulation, entry regulation, quality of service regulation and tax regulation.• Fare regulation- In order to ensure even spread of transportation it is

necessary for the government to regulate fares so that passengers are not exploited and at the same time economic viability of the operators is not jeopardized.

• Entry regulation- regulation in choosing the most qualified candidate to enter the transportation industry.

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• Quality of service regulation- To ensure an efficient, adequate and properly coordinated transport service, it is essential to create a professionally competent cadre of regulatory officials. Beginning with the issue of operating licenses and supervision, the regulatory mechanism should encourage the setting up of appropriate training institutions to improve driving and operating skills in the interest of improving service and ensuring safety

• Tax regulation - The tax structure should foster development of transportation by using the revenues to improve terminal facilities, to evolve safety and environmental standards and to enable growth.

Goals of regulation Protection of public interest Transport as a viable business to attract better manufacturers and

operators Supporting national and strategic interests.

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Improved Transportation Infrastructure• Greater Speed• More Reliability• Lower Transportation Cost

Production• Optimized Production

Locations• Lower Production Cost• Lower Inventory Levels

Distribution• Optimized Distribution

Network• Lower Inventory Levels• Lower Distribution Cost

Economic Benefits • Lower Prices • More Product Variety• Economic Growth and

Efficiency

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GDP Contribution

• India’s transport sector is large and diverse; it caters to the needs of 1.1 billion people.

• Transport sector accounts for a share of 6.4 per cent in India’s Gross Domestic Product (GDP). Road transport has emerged as the dominant segment in India’s transportation sector with a share of 5.4 per cent in India’s GDP.

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Conclusion It is necessary to foster the development of the various transport modes in an integrated manner that will lead to the realization of an efficient, sustainable, safe, and regionally balanced transportation system, where each mode of transport operates in its field of economy and usefulness, with competitive and nondiscriminatory prices that are adequate to support progressive development of transport infrastructure and services. This would also enable the comparative advantages and economic efficiencies to be properly reflected in the user costs.

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Thank You Any questions ?