Logistics infrastructure is a critical enabler of India's agenda for economic development and urbanization. Recognizing its pivotal role, the Indian government will have tripled annual spending on logistics infrastructure over the past seven years, from about $10bn in 2003 to $30bn in 2010. Despite this increase, the country's network of roads, rail, and waterways will be insufficient to accommodate a threefold increase in freight movement over the coming decade. This shortfall in logistics infrastructure will put India's growth at risk, concludes a new McKinsey report, Building India: Transforming the nation's logistics infrastructure.

Since a large part of the logistics network that India needs has yet to be built, the country has a chance to add infrastructure optimally to meet the growing demand. The report finds that to achieve this goal, India must pursue an integrated and coordinated approach that not only closely aligns the development of each mode-railways, roads, and waterways-with the country's needs but also makes better use of existing assets. This will require increasing the railways' share of logistics infrastructure investments from about 40 percent currently to 50 percent. Building a logistics infrastructure capable of handling rising freight traffic more efficiently presents opportunities for user industries and for infrastructure developers and construction companies, among others, the report finds.

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