Boston, MA -- (SBWIRE) -- 08/09/2012 -- India's freight transport sector continues to develop rapidly, desperately trying to keep pace with the rapid growth of the country's economy and trade requirements. Trade growth is set to average over 9% between 2012 and 2016. There are obstacles to this, however, as congestion in ports and antiquated infrastructure impose limitations on growth potential. If investment can be assured, one need only look at the strong expansion of the private Gujarati ports to see the potential. Air and rail freight are both set to grow quickly, with air freight in particular to benefit from India's booming pharmaceutical industry, though, in the short term, global headwinds present some downside risk. However, the sale of Air India's dedicated freighter craft will have been a blow to the homegrown industry, and the business continues to suffer setbacks.

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Headline Industry Data

- 2012/13 Port of Kandla tonnage throughput growth forecast is 10.8% and is projected to average 9.1% a year to 2016/2017.
- 2012 rail freight growth forecast is 5.3% and is projected to average 6.2% to 2016.
- 2012 air freight tonnes growth forecast is 5.8% and is forecast to average 6.6% to 2016.
- 2012 total trade real growth forecast at 7.0%, and to average 9.3% to 2016.

Key Industry Trends

Air India Pulls Out Of Hub Plan

Despite Air India Cargo abandoning its plans to set up a cargo hub, BMI believes there are other companies that can take over the role. Although the air freight industry is suffering from poor operating conditions, we believe that the positive long-term outlook for Indian air cargo volumes will help secure investment.

Exporters' Boycott Adds To Air India's Woes

BMI believes that, while Indian exporters may have boycotted national carrier Air India Cargo over fuel surcharges, they will not be able to escape the fees for long. Jet fuel prices are forecast to be even higher than 2011, which saw many companies struggle to maintain profits in the face of elevated operating costs, and we expect that the surcharges will become an industry standard over the coming months as operators look to share the pain. Nevertheless, the boycott is a further cross to bear for the beleaguered Indian carrier.

Railway Line A Lifeline For Congested Chennai?

BMI believes that investment by the Port of Chennai in new rail connections will help the facility deal with the delays that have plagued it in recent years, and also help alleviate congestion in the nearby city. The move will help it cope with the strong throughput growth we forecast for the facility over the medium term.

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