International rating agency Morgan Stanley has lauded the efforts of Railway Minister Suresh Prabhu for “taking an innovative approach of funding in railways” and termed him “as the driver of change is the man at the top”. The latest report suggest that Indian Railways suffered in the past due to “underinvestment and poor policies”

Commending Prabhu’s role, the report published last week said his focus is on increasing speed of trains rather than burdening an already creaking network and he is taking an “innovative approach to funding”.

The reports indicates India is expected to spend a whopping $95 billion (over `6.34 lakh crore) on ramping up its rail infrastructure, a step that will help in increasing the country’s manufacturing competitiveness, a report says.

“The historical lack of delivery in the Railways creates scepticism, but this time could be different. India will spend $95 billion on railway over the next five years, which would result in 12 per cent GDP growth between 2014-15 to 2018-19,” says the report.

The report also sees inventory cost gains for Corporate India. It’s clear that the railways is the answer to solving India’s transport infrastructure challenges. According to World Bank estimates, India’s logistics costs (at around 10-14 per cent of sales) are 2-3 times the best practice benchmark costs, which hurts India’s manufacturing competitiveness, it added.

“Rail is a cheaper mode of transport than roads (by 20 per cent), yet the share of roads (at 57 per cent) in Indian freight movement is more than 1.5 times that of the Railways, owing to congestion on rail network and poor policies.”

The report cited three key reasons behind the massive decline in the share of the Railways in transporting Indian freight and to some extent, passengers.