In this 21st century globalization and intense competition, foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of India. This article emphasizes the need and urgency for restructuring rail transport services on commercial lines and suggests some reform measures to improve the productivity, efficiency and global competitiveness. It also will focus on role of FDI in development of Indian Railways and also describe Government of India has taken various initiatives as well as introduced policies to mitigate the strain on the existing infrastructure of the Indian Railways as well as address the issue of under investment and slow pace of modernization of railway sector.
KEYWORDS: FDI, Indian Railways, Global Competition, Globalization, Modernization.
Introduction Indian Railways network spread more than 66030 kms, making it the world’s third largest rail network. India has the fourth largest rail freight carrier in the world railway network and also the largest position in passenger carrier. India's railway network is recognized as one of the largest railway systems in the world under single management system. FDI has always been prohibited in the Indian railway sector, which has traditionally been a state owned and operated infrastructure facility. However, Due to the performance the Government changed position recently when the Government decided to open up the India’s largest commercial establishment, for private investments and FDI.
The Department of Industrial Policy and Promotion (DIPP) through it Press Note No. 8 of 2014 dated August 27, 2014 has introduced and permitted FDI in certain sub-sectors of the railways. The year 2014 was witness of many changes in Indian Rail history. Starting from the new Government with an absolute mandate (for the first time in the last three decades), to allowing foreign direct investment (FDI) in the railway sector (for the first time in the last 200 years of Indian rail history).Currently FDI in IR is fully opened up in 17 areas. In high-speed rail projects -informally called bullet trains - a foreign player is now allowed to run a parallel and fully privatized railway company, completely detached from the existing IR network. But FDI continues to remain prohibited in Railway Operations sector.
Objectives In the year 1991, with liberalization in India, 8 major sectors were left out of from FDI. These were Defense sector, Atomic Energy, Coal, Mineral Oil, Mining of important minerals like coal, iron ore, certain minerals of atomic energy and Rail Transportation. As railways is the most widely used mode of transportation catering the need of about 23 million passengers every day. Since independence, India has added 13,000 km of new railway lines bringing the total size to about 66,060 km. Therefore, there is a need for improvement in the infrastructure and development of this sector which was fully government
