THE ECONOMIC WEEKLY

Economic Growth and Transport Requirements

A Comparative Study in Methods of Projection
Krishna R Bharadwaj

Consequent upon live increasing attention paid to the problems of accelerated economic growth, transporta-
tion has assumed added significance, since the relationship between the two is at once intimate and immediate
Transport performance reflects immediately and prominently the two most important dimensions of
development—its spatial diffusion and the quantitative distribution of overall production as also its product
composition through time.
The significance of striking a proper balance between the requirements and the supply of transport
capacity have brought to the fore the need for making fairly reliable projections of transport requirements of a
predetermined production programme, so as to guard against both the indiscriminate waste of capital resources
in the form of greatly under-utilised transport capacity, as well as against the possibilities of serious transport
bottlenecks crippling productive activity.
The need for determining the probable impact of a given production plan on transport services—its
magnitude and location—becomes all the more crucial in a situation where excess capacity in transport does
not exist in the initial stages of planning,
A comparative study of the techniques employed recently to project transport requirements is attempted here
The basis for such projections is the observed relationship between the growth of traffic volume and that of
output in the past (over a time period or at a particular point of time) and the probability of the continuance
of such a relationship in future.
The projections discussed are not complete and independent forecasts but only conditional statements
that are expected as an outcome of a given set of independent factors. The projected transport requirements
imply here that if the previously-fixed production goals are reached in all other sectors, oilier conditions
remaining the same, it could be reasonably expected that the estimated transport flows will he generated.

Basic Premises
I n an interesting study of the
past d e v e l o p m e n t o f
a n d production i n the U S S R ,
traffic
concludes t h a t whereas a signific-
ant downward turn in transport
coefficients appears i m p r o b a b l e , t h e
T h e p r o j e c t i o n i s based
f o l l o w i n g premises:
on the

w i t h a view to determining the " e x p a n s i o n a r y p u s h " appears t o

l o n g range t r a n s p o r t r e q u i r e m e n t s
of that country, J H Blackman1
has p u t f o r w a r d w h a t m a y b e called
" T h e Basic C o m m o d i t i e s A p p r o -
ach " . A n analysis o f t h e past
traffic-output relationships in the
U S S R reveals, a c c o r d i n g t o his
s t u d y , a c e r t a i n stable r e l a t i o n s h i p
between the physical v o l u m e of
industrial production, more
p a r t i c u l a r l y t h a t o f t h e six basic
c o m m o d i t i e s selected b y h i m a n d
the physical volume of freight
t r a f f i c . K n o w l e d g e o f t h i s systema-
t i c r e l a t i o n has been u t i l i s e d b y
t h e a u t h o r t o analyse p r o s p e c t i v e
g r o w t h of transport in relation to
t h a t of o u t p u t . After a cautious
assessment o f t h e vectors o f oppos-
i n g forces o p e r a t i n g o n t h e w e i g h t
c o m p o n e n t a n d t h e space d i m e n s -
ion of freight transport the author
(1) It is assumed that no large
b e o n t h e decline, i m p a r t i n g there- war or any other calamity upsetting
the economic efforts w i l l occur during
by a c e r t a i n degree of s t a b i l i t y to the period ;
the traffic-output relationships. (2) The fundamental goals of the
T h u s o n t h e basis o f t h e past, country will remain more or less
f a i r l y stable, t r a f f i c - o u t p u t r e l a t i o n - stable, implying that investment
would continue to be directed predo-
s h i p a n d i t s expected c o n t i n u a n c e , minantly into heavy industry;
the author projects the railway (3) There would he no radical
shifts in input-requirements of eco-
freight turnover and the freight nomic activities, changing thereby
traffic o n a l l carriers for t h e year the product-mix of traffic.
1962 f r o m pre-war regressions T h e regression t e c h n i q u e used by
(1928-40) o n t h e tonnage o u t p u t o f Blackman is attractive mainly
t h e s i x basic c o m m o d i t i e s coal, because o f its simplicity. The
p e t r o l e u m , steel, t i m b e r , g r a i n a n d choice o f t h e basic c o m m o d i t i e s
c e m e n t ; t w o a l t e r n a t i v e hypotheses is of fundamental importance to
r e g a r d i n g t h e p r o d u c t i o n goals for this approach. In Blackmail's
these (the announced prospective s t u d y , t h e choice was p a r t l y d i c -
targets o f S t a l i n and another t a t e d b y t h e a v a i l a b i l i t y o f statis-
independently estimated output, t i c a l d a t a a n d p o r t l y b y t h e signi-
derived from post-war o u t p u t ficance of t h e c o m m o d i t i e s in t h e
trends adjusted for announced plans n a t i o n a l e c o n o m y a n d also i n traffic
of development) being treated as f l o w s . T h e choice o f the a p p r o -
i n d e p e n d e n t variables. p r i a t e basic c o m m o d i t i e s w i l l h a w

1399
September 2, 1961
to be dictated p r i m a r i l y by the
f o l l o w i n g t w o considerations :
(1) the total freight tonnage of
these commodities will have to form
a significant share of the total freight
traffic :
(2) the commodities will have to
be fairly representative not only of
the pattern of economic development
in the past but also the prospective
pattern of planned development.
Sources of E r r o r
Even such a selection of basic
commodities were possible,
a g g r e g a t i v e p r o j e c t i o n based on such
m a c r o - i n d i c e s us the t o t a l tonnage
o u t p u t o f t h e basic c o m m o d i t i e s
a n d the t o t a l f r e i g h t traffic i n v o l v e s
possibilities of errors, since t h e
f r e i g h t t u r n o v e r of the
c o m m o d i t i e s m i g h t not c o n t i n u e
to bear t h e same quantitative,
relationship with total freight
turnover. T h e a s s u m p t i o n made
in Blackman's study that the
i n v e s t m e n t p a t t e r n i n the f u t u r e
r e m a i n s b r o a d l y u n a l t e r e d rules out
a n y considerable change in the
c o m m o d i t i e s c o m p o s i t i o n o f freight
traffile. However, when freight
prospects arc to be e s t i m a t e d under
t h e p u r p o s i v e l y d i r e c t e d process o f
p l a n n i n g , freight c o m p o s i t i o n is
most l i k e l y t o u n d e r g o significant
changes, i n fact, the r a t i o n a l e o f
d e v e l o p m e n t a l p l a n n i n g w o u l d req-
u i r e a conscious effort to change
the pattern of production.
i n t e r n a l shifts i n traffic c o m p o s i t i o n
w o u l d b e o f great i m p o r t a n c e , i n
d e r i v i n g p o s i t i v e premises for p l a n -
n e d a c t i o n . T o y i e l d reliable p r o -
jections, the freight t u r n o v e r of
t h e basic c o m m o d i t i e s w i l l have t o
a c c o u n t for n o t o n l y a major b u t
also a stable p r o p o r t i o n of t o t a l
freight turnover. The stability of
the r e l a t i o n s h i p w o u l d be affected
even by a change in the i n t e r n a l
c o m p o s i t i o n o f the b a s i c - c o m m o d i -
ties' o u t p u t - i n d e x , i f t h e inter-
i n d u s t r i a l r e l a t i o n s o f these c o m -
p o n e n t s differ s i g n i f i c a n t l y . T h e
i m p a c t o n the t o t a l i n d u s t r i a l p r o -
d u c t i o n o f the e c o n o m y o f each
a c t i v i t y i s d i f f e r e n t i a t e d b o t h i n its
q u a n t i t a t i v e aspect ( t h a t is, i n
t e r m s o f i n d u c e d changes i n p r o d u c -
t i o n levels o f o t h e r a c t i v i t i e s ) a n d
i t s l o c a t i o n ( t h a t is, t h e specific
THE ECONOMIC WEEKLY
sector t h u s influenced.) The differ-
ential composition of the basic
c o m m o d i t y i n d e x w i l l t h u s occasion
different p a t t e r n s a n d q u a n t a o f
traffic flows.
A n o t h e r l i k e l y source o f e r r o r
w o u l d b e t h e a s s u m p t i o n t h a t the
t r a f f i c - o u t p u t r a t i o o f each o f t h e
commodities w o u l d remain constant.
W i t h development, this assumption
w o u l d n o t s t a n d i n m o s t cases.
an
H o w e v e r , whereas such a n assump-
t i o n c o u l d b e m a d e for s h o r t t e r m
forecasting, o n l y special c o n d i t i o n s
w o u l d w a r r a n t i t s use f o r l o n g
range p r o j e c t i o n s .
A n o t h e r v a r i a n t o f the same t y p e
basic
o f a g g r e g a t i v e a p p r o a c h appears i n
The B r a z i l i a n s t u d y 2 of t h e
U n i t e d N a t i o n ' s C o m m i s s i o n for
Lat in America. The study employs
the m e t h o d o f d e t e r m i n i n g t h e
relationship between the volume
of t r a n s p o r t effected over a c o m -
paratively lengthy period and the
v o l u m e o f goods i n c i r c u l a t i o n
( i n c l u d i n g b o t h domestic a n d i m -
ported output) to obtain the
elasticity of demand for freight
transport, which, when applied to
t h e average a n n u a l r a t e o f increase
of goods in c i r c u l a t i o n , gives a
p r o b a b l e r a t e o f g r o w t h o f the
average a n n u a l d e m a n d f o r t r a n s -
p o r t i n t h e n e x t few years.
These
This s t u d y w h i c h employs even
greater degree o f a g g r e g a t i o n t h a n
the basic c o m m o d i t i e s a p p r o a c h
suffers f r o m t h e same defect o f
overgenerality. Transport a c t i v i t y
enters a s a n i n p u t i n a l m o s t a l l t h e
sectors o f the e c o n o m y . N e v e r -
theless, c o m m o d i t i e s differ m a r -
kedly in their transport-orientation
a n d t r a n s p o r t needs. An over-all
p r o d u c t i o n i n d e x fails t o g i v e
a d e q u a t e w e i g h t t o the d i f f e r e n t i a l
t r a n s p o r t needs of a d i f f e r e n t i a l l y
composed n a t i o n a l o u t p u t .
II
Input-Output Technique
W i t h o u t entering into technical
discussions p e r t a i n i n g t o t h e t h e o -
retical background of the input-
o u t p u t analysis, we m i g h t indicate
here t h e use o f t h i s t o o l t o d e t e r m i n e
1400
transport requirements and its
p a r t i c u l a r relevance a n d a d v a n t a g e s
f o r o u r p r o b l e m . Suffice t o n o t e
here t h a t t h e i n p u t - o u t p u t a n a l y s i s
is based u p o n a general e q u i l i b r i u m
a p p r o a c h t o economic p r o b l e m s a n d
is e m p l o y e d as a t e c h n i q u e to s t u d y
empirically the simultaneous inter-
dependencies a m o n g t h e d i f f e r e n t
parts of the economic system as
revealed t h r o u g h c o - v a r i a t i o n s o f
i t s v a r i o u s measurable m a g n i t u d e s .
Since t h e c o n c e p t u a l scheme o f t h e
i n p u t - o u t p u t t a b l e presents d a t a
disaggregated i n t o the prosessing,
the final demand and the factor-
p a y m e n t s s t r u c t u r e , it is possible
to study the relationships a m o n g
them. A m o n g its m a n y uses,
r e l e v a n t to o u r s t u d y , is the p r o -
d u c t i o n r e q u i r e m e n t s analysis a n d
t h e i m p l i c a t i o n s o f such r e q u i r e -
m e n t s i n t e r m s o f resource u t i l i s a -
t i o n . I t i s possible, i n o u r case,
to derive transport requirements
of a p r o d u c t i o n programme, with the
knowledge regarding the i n p u t -
o u t p u t relations prevailing in the
economy.3 T h e inverse o f t h e
m a t r i x o f i n p u t coefficients 1 can
give the direct and indirect req-
u i r e m e n t s o f t r a n s p o r t services f o r
specified deliveries t o final d e m a n d
a n d thus brings out the transport-
dependence o f each o f t h e sectors
of the economy. N o t only the
i m p a c t of a p r o d u c t i o n p l a n on
t r a n s p o r t sector c a n b e k n o w n but
also t h e i m p l i c a t i o n s of s u c h a
projected transport development
on o t h e r resources can be d e r i v e d
directly from the table a n d its
inverse.
F r o m the point of v i e w of trans-
p o r t a t i o n planning the regional
i n p u t - o u t p u t tables w o u l d b e o f
i m m e n s e use. The regional models
p e r m i t t h e effects o f a g i v e n n a t i o n -
al development to be broken d o w n
into regional components. The
demand for and the supply of com-
m o d i t i e s v a r i e s b e t w e e n regions,
interacting w i t h Ideational patterns
of production and consumption,
thereby influencing commodity-
flows in the economy. The constru-
c t i o n o f r e g i o n a l models, h o w e v e r ,
has been u n d e r t a k e n on a v e r y
THE ECONOMIC WEEKLY September 2, 1961

l i m i t e d scale; t h a n k s t o t h e d e f i c i - note, together w i t h the direct re- traffic-output ratios of p a r t i c u l a r

ency of appropriate statistics, apart quirements, the o u t p u t require- sectors, e i t h e r because of a h i g h e r
f r o m c o n c e p t u a l difficulties as, for m e n t s i n a l l t h e sectors c o m p a t i b l e w e i g h t f a c t o r o r changes i n t h e
e x a m p l e , o f d e f i n i n g a n economic with the targeted programme. l e n g t h o f h a u l , w e can m o d i f y , t h e
region. M o r e o v e r , as one finds f r o m t h e f i n a l results a c c o r d i n g l y . T h u s , i t
Disaggregative Picture analysis o f traffic flows o n I n d i a n m a y be t h a t a new l o c a t i o n a l c o m -
r a i l w a y s , t h e c i r c u l a r dependence o f p l e x i s p l a n n e d ahead, w i t h consequ-
The principal advantage of the
t h e t r a n s p o r t s y s t e m is s i g n i f i c a n t l y e n t changes i n t h e l e n g t h o f h a u l o f
i n p u t - o u t p u t technique over the
h i g h . B y c i r c u l a r dependence i s inputs or o u t p u t s or t h a t a trend
a g g r e g a t i v e approaches is t h e dis-
m e a n t t h e d i r e c t a n d i n d i r e c t re- factor i s i d e n t i f i a b l e i n the h i s t o r i c a l
aggregative picture of the economy
q u i r e m e n t s of a sector ( t r a n s p o r t , series o f average l e n g t h o f h a u l .
i t offers, h i g h l i g h t i n g t h e i n t e r -
in t h i s case) for a u n i t d e l i v e r y of Such changes, e v o l v i n g t h r o u g h
connected n a t u r e o f the v a r i o u s
o u t p u t t o f i n a l d e m a n d b y the t i m e , o r i n the m a k i n g , c o u l d h e
a c t i v i t i e s . B y g i v i n g a disaggre-
sector itself. The inter-industry n e a t l y i n c o r p o r a t e d i n the final
gative picture of the planned
relations d a t a b y g i v i n g the e x t e n t results. I f the changes are q u i t e
n a t i o n a l p r o d u c t i t a l l o w s for t h e
of such dependence can t a k e care d r a s t i c r e q u i r i n g a r e v i s i o n in the
use o f different t r a f f i c - o u t p u t ratios
o f a n o t h e r l i k e l y source o f under- input-coefficients themselves, t h e
for d i f f e r e n t sectors. A g a i n , t h e
estimation. i t e r a t i v e p r o c e d u r e could be a d o p t e d
i n t e r - i n d u s t r i a l r e l a t i o n s o f each
t o solve the new set o f s i m u l t a n e o u s
i n d u s t r y are diverse d e p e n d i n g u p o n F r o m the p o i n t o f v i e w o f p l a n n -
equations. 5 Even where t h e e x a c t
their i n p u t structure and the pattern i n g , i t i s essential not o n l y t o k n o w
d e v i a t i o n f r o m t h e assumed trans-
o f dispersal o f t h e i r o u t p u t . T h e t h e t o t a l t r a n s p o r t needs h u t also
p o r t coefficient is not k n o w n , it
direct and indirect requirements of t h e i r sector-wise d i s t r i b u t i o n . T h e
w o u l d s t i l l be f r u i t f u l to k n o w in
t r a n s p o r t i n respect o f each i n - a d d i t i o n a l t r a n s p o r t c a p a c i t y has
w h a t d i r e c t i o n the e s t i m a t e i s
d u s t r y differ a n d , as such, consider- t o b e p r o v i d e d i n adequate a m o u n t s
biased. I t w o u l d n o t b e possible t o
a t i o n o f o n l y the d i r e c t i m p a c t o n a n d located at t h e p o i n t s where
locate errors in e s t i m a t i o n in such
t r a n s p o r t o f a sector w i l l give a the h i g h l y t r a n s p o r t dependent
a w a y , leave alone r e c t i f y t h e m , in
d i s t o r t e d p i c t u r e o f its u l t i m a t e a c t i v i t i e s are s i t u a t e d . T h e inter-
the a g g r e g a t i v e regression tech-
t r a n s p o r t needs. i n d u s t r y d a t a facilitates such an
niques.
analysis, since we can locate the
T h e need to d e t e r m i n e the i n - t r a n s p o r t r e q u i r e m e n t s sector-wise Ill
direct t o g e t h e r w i t h the direct a n d w i t h s u p p l e m e n t a r y knowledge General Characteristics
t r a n s p o r t r e q u i r e m e n t s o f specified r e g a r d i n g the e x i s t i n g a n d p l a n n e d (Coming to the general character-
o u t p u t deliveries t o f i n a l d e m a n d l o c a t i o n a l p a t t e r n o f industries istics of these p r o j e c t i v e techniques
becomes a l l the m o r e i m p o r t a n t d e r i v e t h e probable geographical we m i g h t note here t h a t l o c i t i o n a l
under a m i x e d e c o n o m y set-up. d i s t r i b u t i o n o f the prospective trans- d y n a m i c s the i n t e r p l a y o f indus-
T h e i n s t i t u t i o n a l factor, in such a p o r t flows, a l l o c a t i n g t r a n s p o r t t r i a l location on transport evolution
case, puts a c o n s t r a i n t on c o m p l e t e capacity accordingly. a n d o f new t r a n s p o r t l a y o u t s o n
target s e t t i n g for all a c t i v i t i e s since i n d u s t r i a l a c t i v i t y remains y e t t o
not a l l of t h e m are under the direct Constancy Assumption b e b r o u g h t w i t h i n the range o f
c o n t r o l o f t h e state. G e n e r a l l y , One of the objections raised these techniques. T h e y are t h u s
targets are specified for a l l a c t i v i t i e s against the use of the i n p u t - o u t p u t better suited as a s h o r t t e r m project-
under direct state c o n t r o l a n d for m e t h o d i n our p r o b l e m w o u l d b e i n g device. I n a c o u n t r y w i t h n o
some o f the i m p o r t a n t p r i v a t e l y the assumed c o n s t a n c y of the prospects of e x t e n s i v e g e o g r a p h i c a l
o w n e d industries. T h e a v a i l a b i l i t y t r a f f i c - o u t p u t r e l a t i o n for each of g r o w t h a n d l o n g established lines o f
o f t h e r e q u i r e d i n p u t s , net o f p l a - the sectors i n the p r o j e c t i o n . A p a r t t r a n s p o r t , the analysis of traffic
n n e d i m p o r t s , i n adequate q u a n t i - f r o m the fact t h a t the o t h e r projec- g e n e r a t i o n m a y well centre a r o u n d
ties t o f u l f i l the p l a n p r o g r a m m e s t i v e techniques suffer f r o m the same regional m o v e m e n t s o f goods i n
is, therefore, i m p l i c i t l y assumed. defect, i t m a y b e n o t e d t h a t the volumetric terms. In a country,
I f targets were comprehensive, i n p u t - o u t p u t m e t h o d has the ad- on the o t h e r h a n d , seeking new
c o v e r i n g the entire f i e l d o f a c t i v i t i e s vantage t h a t such errors in the esti- avenues for i n d u s t r i a l l o c a t i o n a n d
a n d these were to satisfy t h e com- mates as arise f r o m t h i s a s s u m p t i o n c a r v i n g o u t new t e r r i t o r i e s , the
p a t i b i l i t y c o n d i t i o n , a n e s t i m a t i o n are n o t t r e a t e d as o r i g i n a t i n g f r o m role of t r a n s p o r t facilities a c t i n g as
o f d i r e c t t r a n s p o r t r e q u i r e m e n t s a stochastic process as in t h e o t h e r a n i n i t i a t o r o f economic a c t i v i t i e s
alone w o u l d have been sufficient. p r o j e c t i v e techniques b u t are a t t r i - m i g h t be significant, in w h i c h case
H o w e v e r , in so far as a c t i v i t i e s are b u t a b l e ( a n d d i s t i n g u i s h a b l e as such) the a p p r o p r i a t e kind of traffis
p a r t i a l l y p l a n n e d , t h e i n d i r e c t re- t o f a i l u r e t o e s t i m a t e c o r r e c t l y t h e analysis m u s t t a k e account o f sitec
q u i r e m e n t s have necessarily to be s t r u c t u r a l p a r a m e t e r s . I f there are o f such a c t i v i t i e s — already establish-
considered i n a s m u c h a s t h e y d e - f a i r l y cognizable changes i n t h e ed or prospective ones a n d m u s t
1401
September 2, 1961
e s t i m a t e i n each case t h e i n t e r -
regional and intra-regional move-
ments of merchandise, relating
t h e m t o d i f f e r e n t t r a n s p o r t alter-
n a t i v e s . F o r such a s u d y d e t a i l e d
s t a t i s t i c s p e r t a i n i n g , inter alia, to
inter-regional demand patterns,
i n p u t r e q u i r e m e n t s o f each i n d u s t r y ,
p r o s p e c t i v e i n v e s t m e n t decisions o f
the c o m m u n i t y in response t o
alternative transport lay-outs,
w o u l d b e r e q u i r e d . F a i l i n g this
s t a t i s t i c a l e q u i p m e n t , the nearest
a p p r o x i m a t i o n w o u l d be inter-
i n d u s t r y data supplemented, by a
t a b l e g i v i n g the p r o b a b l e average
h a u l s o f the c o m m o d i t i e s i n t e r m s
o f w h i c h the i n t e r - i n d u s t r y flows
are a n a l y s e d .
T h e d i s t r i b u t i o n o f l o a d a s bet-
w e e n the d i f f e r e n t modes o f trans-
p o r t poses b o t h a p r o b l e m i n p o l i c y
f o r m u l a t i o n as well as s t a t i s t i c a l
estimation. I n the t w o studies,
referred to above, the h i s t o r i c a l
t r e n d o f the g r o w t h o f d i f f e r e n t
t r a n s p o r t agencies has been, u t i l i s e d
as a basis to e s t i m a t e p r o s p e c t i v e
requirements. Blackman, in his
s t u d y , assumes that t h e g r o w t h
r a t e for o t h e r modes o f t r a n s p o r t
w i l l b e higher than, that for r a i l w a y s
c o n s i d e r i n g the h i s t o r i c a l tendency
f o r s u b s t i t u t i o n o f r a i l w a y s b y road
t r a n s p o r t . T h e Brazilian, s t u d y ,
o n t h e o t h e r h a n d , assumes " f o r
t h e sake o f c o n v e n i e n c e " t h a t the
p a r t i a l d e m a n d for v a r i o u s agencies
o f t r a n s p o r t w i l l g r o w at the same
rate as aggregate f r e i g h t . T h e
d i s t r i b u t i o n o f t o t a l load between
t h e d i f f e r e n t modes o f t r a n s p o r t
w i l l depend upon their relative
fates of growth, the probable
l o c a t i o n a l p a t t e r n , i n t e r - c a r r i e r re-
lations policy adopted by the
Government and the type of i n -
dustrial structure planned to he
established or e x p e c t e d to be gene-
rated in future. I t i s observed t h a t
preference for one m o d e of trans-
p o r t against a n o t h e r is, in a great
measure, influenced b y c o m m o d i t y -
composition of traffic. The expan-
sion of consumer goods, for e x a m p l e ,
is associated w i t h t h e speedy
g r o w t h of automobile transport.
Perishable c o m m o d i t i e s l i k e vege-
tables a n d d a i r y p r o d u c t s , glass-
ware, goods i n smalls, etc r e l y
more o n a u t o m o b i l e t r a n s p o r t t h a n
on r a i l w a y s . I n s o f a r as dependence
on one m o d e as against a n o t h e r is
associated w i t h c o m m o d i t y g r o u p s
a n d the i n t e r - i n d u s t r y t r a n s a c t i o n s
table records t h e different modes
of t r a n s p o r t as separate a c t i v i t i e s ,
t h e effects o f c h a n g i n g c o m p o s i t i o n
of national p r o d u c t upon the
r e l a t i v e uses o f d i f f e r e n t modes o f
transport w i l l be automatically
a l l o w e d for i n t h e i n p u t - o u t p u t
method. T h e i m p a c t o f exogenous
influences, l i k e p u r p o s i v e policies
a d o p t e d b y the G o v e r n m e n t , a s
d i f f e r e n t i a t e d f r o m the " s t r u c t u r a l °
ones, h o w e v e r , w i l l h a v e t o be
independently estimated.
Capital Requirements
G i v e n the a d d i t i o n a l d e m a n d f o r
f r e i g h t traffic i n t e r m s o f the
probable traffic-flows o r i g i n a t i n g
under a given production pro-
gramme, capital requirements of
such a t r a n s p o r t s u p p l y w i l l h a v e t o
be c a r e f u l l y assessed, t a k i n g i n t o
c o n s i d e r a t i o n t h e e x t e n t o f excess
c a p a c i t y a v a i l a b l e a n d the p r o b a b l e
trends i n efficiency o f u t i l i s a t i o n o f
existing capacity. Knowledge
regarding b o t h the direction of
traffic? flows a n d the c o m m o d i t y
composition is indispensable for
efficient p l a n n i n g o f c a p a c i t y creat-
ion and utilisation. I f t h e new
traffic flows arc s i t u a t e d at t h e l o w -
density points on railway network,
the c a p i t a l i n v e s t m e n t necessitated
b y t h e m w o u l d b e o f a l o w e r order
t h a n i f t h e y h a d arisen a t a l r e a d y
traffic-saturated points. Composit-
i o n o f traffic influences the r e q u i r -
ed capital investment in t w o ways.
I n the f i r s t place, the l o a d i n g
c o n d i t i o n s of d i f f e r n t categories of
goods arc d i f f e r e n t , t h e l i g h t e r
goods r e q u i r i n g m o r e space a n d
hence more r o l l i n g stock than
h e a v i e r goods o f e q u i v a l e n t w e i g h t .
A g a i n , since t h e gross w e i g h t o f
a t r a i n c a n n o t exceed a l e v e l
depending upon the tractive power
of the locomotives, the locomotive
r e q u i r e m e n t s o f t h e l i g h t e r goods,
1402
THE ECONOMIC WEEKLY
i n t u r n , are c o m p a r a t i v e l y h i g h e r .
T h e haulage o f more n u m b e r o f
wagons a n d t r a i n s f u r t h e r "leads t o
the question of maintaining
s t a n d a r d s o f o p e r a t i o n a l efficiency
requiring, at times additional
investment in line capacity.
Secondly, the c o m p o s i t i o n o f traffic
affects c a p i t a l r e q u i r e m e n t s t h r o u g h
t h e specialised n a t u r e o f c a r r y i n g
capacity required by certain
commodities. These, l i k e p e t r o l
and chemicals, require special
p u r p o s e w a g ns w h i c h h a v e to be
p r o v i d e d for i n ease o f t h e i r
deficient s u p p l y e v e n i f there were
n o general w a g o n shortage. Here
again, the i n p u t - o u t p u t approach
w i t h i t s sectoral b r e a k d o w n o f
traffic r e q u i r e m e n t s m i g h t p r o v e
m o r e useful.
T e c h n o l o g i c a l changes influenc-
i n g the i n p u t p a t t e r n s i n p r o d u c t i o n
and t h r o u g h t h e m the prospective
t r a n s p o r t needs are of considerable
significance. Such technological
changes, for e x a m p l e , are the sub-
s t i t u t i o n o f s o l i d fuels b y t h e
t r a n s p o r t - s a v i n g l i q u i d a n d gaseous
fuels, new m e t h o d s of t r e a t i n g ores
at pit-heads, more efficient use of
b y - p r o d u c t s , etc. The projective
techniques based u p o n the regres-
sion a p p r o a c h are n o t capable o f
h a n d l i n g such shifts. T h e i n p u t -
o u t p u t method could allow for
changes i n i n p u t s t r u c t u r e i f t h e y
arc explicitly identifiable and
measurable.
Price Changes
N o n e o f t h e p r o j e c t i v e techniques,
o u t l i n e d above, takes n o t e o f the
effects o f r e l a t i v e price changes i n
the economy w h i c h through induc-
i n g i n p u t s u b s t i t u t i o n m i g h t affect
traffic f l o w s . R e g i o n a l p r i c e v a r i a -
tions m i g h t , t h r o u g h setting-up
m a r k e t laws i n t o a c t i o n , s t i m u l a t e
or retard inter-regional c o m m o d i t y
m o v e m e n t s ; changes i n t h e p r i c e
o f t r a n s p o r t services themselves
m i g h t affect cost a n d p r o f i t a b i l i t y
c a l c u l a t i o n s o f producers a n d i n f l u -
ence traffic flows t h e r e b y . These
issues, real a n d i m p o r t a n t as t h e y
are, i n d i c a t e t h e c o m p l e x i t y o f t h e
problem. T h e fact t h a t most of
THE ECONOMIC WEEKLY WEEKLY September 2, 1961

t h e estimates i n a n y p l a n n e d p r o - of a few basic c o m m o d i t i e s l i k e

g r a m m e are m a d e u n d e r t h e assum- steel a n d coal whose p r o d u c t i o n is Then the system of equation could be
written as :
p t i o n of c o n s t a n t prices is a fairly concentrated and d i s t r i b u t i o n [X]-[A] [X]+[XD] or [ I - A ] [ X ] - [ X D ]
testimony to the formidability of regulated.
i . c . [ X ] - [ I — A ] - 1 [ X D ] where [ I ] i s
p r o j e c t i n g price changes a n d con- T h e p r o j e c t i v e techniques y i e l d a unit matrix.
sequent changes i n the real s t r u c t u r e t h u s essentially a s h o r t t e r m a n d This implies that given the deliveries to
of the economy. an approximate view of prospective final demand, [ X D ] , the production levels
required to support these can be derived,
traffic flows. Successive a p p r o x i - given the technics) coefficients.
A n o t h e r factor t h a t i s n o t e x p l i -
m a t i o n t o r e a l i t y seems t o b e the 4. The 'inverse' of the input-output
c i t l y considered i n a l l these pro-
only solution to I the complex table, in its standard form, it denned as
j e c t i v e techniques is t h e p r o b l e m
p r o b l e m . D e s p i t e c e r t a i n short- a matrix [ 1 - A ] " 1 where [I] is the unit
of u e f f i c i e n t " p l a n n i n g of traffic matrix and [ A ] is the matrix of input
comings, a l r e a d y m e n t i o n e d , t h e
flows. Recent developments in
i n p u t - o u t p u t technique could be
linear programming techniques
p r o f i t a b l y used t o y i e l d t h e f i r s t where xij - deliveries from the 'i n
c o u l d b e a d o p t e d t o solve the pro-
approximation. sector to J th sector and xj is the total output
b l e m o f efficient u t i l i z a t i o n o f
transport capacity. G i v e n the of j th sector, number of sectors being n.
NOTES
c a p a c i t y r e s t r a i n t one c o u l d f i n d 1. " Transportation ''; contributed to Each element zij In the matrix [zij]
o u t the o p t i m a l p l a n o f a l l o c a t i n g the 'Soviet Economic Growth ' (Ed) A — [I — A p 1 gives the total (direct and
Bergson (New York, 1953) (pages 126-101)
t r a n s p o r t c a p a c i t y t o f u l f i l scheduled 2. U N O : "Analysis and Projections indirect) requirements of the output
deliveries t o fixed m a r k e t p o i n t s o f Economic Development"; Part I I , o f i l h sector per unit delivery t o f i n a l
(New York, 1956),
f r o m f i x e d p r o d u c t i o n centres. A l s o , demand by the j th sector.
given the d e m a n d r e q u i r e m e n t s 3. The mathematical basis of this pro- 5. The iterative method based on
a n d s u p p l y capacities a t m a r k e t cedure could be presented as follows : successive approximation, as summarized
If X i = total output of soot or 'i' ; by Chenery, H B and Clark, P G (in
a n d p r o d u c t i o n points, respectively, their book, "Inter-industry Economics,"
a c c o r d i n g t o c o m m o d i t i e s , traffic London, 1950, page 30), it as follows;
flows c o u l d be p l a n n e d so as to
m i n i m i s e t r a n s p o r t costs for a g i v e n
f r e i g h t rate p a t t e r n . (Whereas the
latter type of application is pri-
m a r i l y a f i r m problem,- the former
is relevant to the decision-making
b y t r a n s p o r t agencies. T h e most
efficient p l a n w o u l d be a c o m b i n a -
t i o n o f the o p t i m a l decisions o f
each i n d i v i d u a l firm rega d i n g the
m o s t efficient r o u t i n g o f deliveries
i n order t o m i n i m i s e t r a n s p o r t cost
a n d the o p t i m a l p l a n o f the trans-
p o r t agencies p e r t a i n i n g t o the
m o s t efficient u t i l i s a t i o n o f trans-
p o r t c a p a c i t y i n order t o f u l f i l the
d e m a n d for transport services.
T h e t w o types o f decisions are i n
n o w a y u n r e l a t e d since the freight
r a t e p a t t e r n , traffic f l o w s a n d u t i l i -
s a t i o i i of t r a n s p o r t c a p a c i t y are
m u t u a l l y interrelated). A p a r t from
r e q u i r i n g d e t a i l e d statistics regard-
ing composition and quanta of
traffic a t a l l n o d a l p o i n t s , the f u l l -
fledged a p p l i c a t i o n o f the linear
p r o g r a m m i n g m e t h o d s o n a n eco-
n o m y - w i d e scale w o u l d r e q u i r e a
consideral le degree of centralised
decision m a k i n g . A t t e m p t s have
been m a d e , h o w e v e r , t o a p p l y
t h e m , a t least p a r t i a l l y , i n t h e case

1403

x i ( 3 ) , X 1 ( 4 ) ... etc. are successive increr
mental outputs required
After computing sufficient number of
rounds, the remaining incremental out-
puts could be approximated by Adding
a residual
increment in the last round and r = the
average of the ratios of the last two
increments for each of the sectors.
6. For an application of the input-out-
put technique to derive railway freight
requirements w i t h the production targets
of the Second Five Year Plan of India,
see my unpublished thesis : "Techniques
of Transportation Planning, with Parti-
cular Reference to Railways ", University
of Bombay, 1960
Synthetic Rubber Manufacture
A B E G I N N I N G U being made w i t h
the manufacture of synthetic
rubber in I n d i a . The first plant is
being set up in Bareilly by Synthe-
tics & Chemicals L t d , a company
formed j o i n t l y by Kilachands and
the Firestone T y r e & Rubber Com-
pany of U S A. The p l a n t is ex-
pected to produce 20,000 tons per
year of styrene butadiene and co-
polymer.
Besides the Bareilly plant, Messrs
Duncan Bros have obtained technical
collaboration f r o m P h i l i p s Petroleum
Company for the setting up of a
synthetic rubber plant in Assam.
O u t p u t is expected to be 20,000 tons
1404
THE ECONOMIC WEEKLY
CIS 1-1 poly butadiene,
and the p l a n t w i l l cost Rs 15 crores.
An analysis of the p r o d u c t i o n tar-
gets envisaged in the T h i r d Five-
Year Plan indicates the considerable
importance w h i c h synthetics arc l i k e -
ly to assume in meeting the rubber
requirements of the country. India's
current consumption of rubber is
estimated at 53.000 tons and this is
expected to rise to about 100,000
tons by the end of the T h i r d Five-
year Plan. D u r i n g this period it is
proposed to increase the p r o d u c t i o n
of natural rubber f r o m about 26,000
tons to 45,000 tons and that of syn-
thetic rubber f r o m n i l to 50,000 tons.