Academic journal article Indian Journal of Industrial Relations

Transport Equipment Industry of India in the Era of Globalization

Academic journal article Indian Journal of Industrial Relations

Transport Equipment Industry of India in the Era of Globalization

Article excerpt

Role of Transport

The role of transport in economic development is usually discussed in relation to its contribution to the development of domestic trade. Globalization has changed this perception. The ability of a country, and particularly the more isolated communities within a country, to participate in trade depends on the quality of the transport and communication infrastructure that allows them access to the world trading system. If liberalization of trade can open new markets, appropriate transport infrastructure, timely delivery and the quality of services provided are essential elements in determining the competitiveness of products for global markets.

Like many economic activities that are intensive in infrastructure, the transport sector is an important component of the economy impacting on development and the welfare of population. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multiplier effects such as better accessibility to markets, employment and additional investments. When transport systems are deficient in terms of capacity or reliability, they can have an economic cost such as reduced or missed opportunities. Transport also carries an important social and environmental load, which cannot be neglected. Thus, from a general standpoint the economic impacts of transportation can be direct and indirect:

* Direct impacts related to accessibility change where transport enables larger markets and savings in time and costs.

* Indirect impacts related to the economic multiplier effects where the price of commodities, goods or services drop and/or their variety increases.

Mobility is one of the most fundamental and important characteristics of economic activity as it satisfies the basic need of moving from one location to the other, a need shared by passengers, freight and information. All economies and regions do not share the same level of mobility as most are in different stages in their mobility transition. Economies that possess greater mobility are often those with better opportunities to develop than those suffering from scarce mobility.

Providing this mobility is an industry that offers services to its customers, employs people and pays wages, invests capital and generates income. The economic importance of the transportation industry can thus be assessed from macroeconomic and microeconomic perspectives:

* 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 for between 6% and 12% of the 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 for around 4% of the costs of each unit of output in manufacturing, but this figure varies greatly according to sub sectors.

Transportation links together the factors of production in a complex web of relationships between producers and consumers. The outcome is commonly a more efficient division of production by an exploitation of geographical comparative advantages, as well as the means to develop economies of scale and scope. The productivity of space, capital and labor is thus enhanced with the efficiency of distribution and personal mobility. It is acknowledged that economic growth is increasingly linked with transport developments, namely infrastructures but also managerial expertise is crucial for logistics. The following impacts can be assessed:

* Networks. …

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