Why Public Transport Is the Next Economic Reform

As Indian cities swell, the government must treat public transport as critical infrastructure rather than a social service.

A central idea in modern urban planning is that real progress is not when the poor own cars, but when the wealthy use public transport. Often attributed to Columbian President Gustavo Petro, it originates from Enrique Peñalosa, former Mayor of Bogotá, whose reforms showed that strong public transit and equitable urban spaces define development. In India, this philosophy is especially relevant. Public transport should be seen not as a local utility or welfare service, but as a core national economic strategy. With urbanization projected to reach 876 million by 2050, rising private vehicle use has increased congestion, reduced productivity, worsened air quality, and imposed macroeconomic costs. During the West Asian crisis, Prime Minister Narendra Modi reinforced the approach for energy conservation through work-from-home, greater public transport use, electric mobility, and carpooling. The crisis highlighted how robust public transport systems strengthen not just mobility, but also energy security.

Strong Case

The economic case for prioritizing public transport over private vehicle infrastructure rests on several factors. Modern growth relies on agglomeration - the clustering of people and businesses in cities - but congestion erodes these gains by limiting mobility. Efficient public transit expands a city’s effective labour market, allowing workers to access distant job centers quickly. By moving large numbers of people efficiently, mass transit improves job matching and boosts overall urban productivity.

For low-income urban households, daily commuting costs are a significant financial burden. In Indian cities, these expenses often account for 20–30 percent of income, far above the sustainable benchmark of 10 percent. In Mumbai, the poorest households spend about 16 percent of their income on transport, with a large share going to bus and rail fares. Limited public transit forces them to walk long distances or rely on costly informal options. Expanding affordable or subsidized transit can boost disposable incomes, improve equity, and expand access to jobs and education. Each passenger-kilometre shifted from private vehicles to public buses or electrified rail reduces petroleum demand. Given India’s dependence on imported crude, expanding public transit is crucial import-substitution strategy.

Traffic congestion imposes a heavy physical and economic burden on Indian cities. A 2018 Boston Consulting Group study estimated that peak-hour congestion in Delhi, Mumbai, Bengaluru, and Kolkata costs over Rs. 1.47 trillion annually due to lost productivity, fuel waste, and environmental damage. These delays significantly erode human capital. Bengaluru alone lost massive productive hours in 2018, costing about Rs. 11.7 billion, while in Delhi, congestion reduces annual earnings by Rs. 7,200–Rs. 25,900 depending on worker skill levels. Public transportation is a key driver of social inclusion, offering affordable mobility to marginalized groups, seniors, and people with disabilities. Safe, reliable, and well-lit transit is especially vital for women, as it reduces safety concerns and travel costs. By improving access, high-quality public transport enhances female workforce participation and economic independence.

Complex Web

India’s public transportation network has evolved from a centralized, long-distance colonial railway system into a complex, multimodal urban transit web. Over time, suburban networks became vital to cities like Mumbai, Kolkata, and Chennai. Mumbai’s system, among the busiest globally, carries over 7.5 million passengers daily across a 450 km network, forming the backbone of the city’s economy. Post-independence, the Road Transport Corporations Act (1950) enabled bus services through State Road Transport Undertakings (SRTUs), which became the primary mode of public transport. Despite funding constraints and aging fleets, buses remain dominant, carrying majority passengers. The 21st century marked a shift toward metro rail systems. Following Kolkata’s early metro, the Delhi Metro (2002) sparked rapid expansion. By 2026, India’s metro network exceeded 1,070 km across 21 cities, with daily ridership surpassing 11 million, redefining urban mobility and supporting economic growth.

India’s public transport system reveals sharp contrasts across modes in capacity, efficiency, and financial sustainability. Legacy suburban rail networks operate under severe stress, with peak-hour trains carrying nearly twice their designed capacity leading to unsafe super-dense crush loads. This chronic overcrowding results in over 3,500 fatalities annually, highlighting the urgent need for safety improvements and network expansion.

SRTUs dominate surface mobility but face chronic financial losses. The collective fleet size of all SRTUs in India comprises approximately 1.5 million buses. Structural issues include artificially low fares, rising fuel and labour costs, and mandatory service on low-demand rural routes. Capacity constraints are severe -India has only 1.2 buses per 1,000 people, far below countries like Thailand (8.6) and South Africa (6.5). Urban benchmarks require 60 buses per 100,000 population, yet cities like Delhi operate 7,000 buses against a demand of 15,000, contributing to a national shortfall of 145,000 buses.

Metro rail systems represent the most advanced segment. Since 2014, India’s metro network has expanded from 248 km in 5 cities to over 1,070 km across 21 cities by 2026, making it the third-largest globally. Daily ridership has increased from 2.8 million to over 11.2 million. These systems offer high-capacity, fast, and clean urban mobility.

Private and informal mobility solutions are also evolving steadily. Platforms like Cityflo operate 1,000 buses across major cities, delivering over 5 million annual rides with premium fares (Rs. 150 per trip). By targeting middle-class commuters, they help reduce reliance on private cars and ease peak-hour congestion.

Significant Challenges

India’s public transport systems face significant financial and operational challenges across segments. SRTUs remain structurally loss-making, with only 2 out of 58 reporting profits in FY22, largely due to rigid fare controls, rising input costs, and obligations to operate low-demand routes. Their combined annual losses are estimated at around Rs. 30,000 crore. Aging fleets (averaging about eight years) and limited capital investment have further weakened asset utilization and service quality. Additionally, excessive political interference and governance inefficiencies have compounded these challenges, affecting overall performance and sustainability. SRTUs also face technological inefficiencies, with poor integration between ticketing and management systems causing duplication. Additionally, shifts to contract-based operations have created workforce imbalances, requiring reskilling and redeployment strategies.

Metro rail systems, though technologically advanced with automated operations and ticketing, struggle with high capital costs and underutilization, with ridership often at 20–50 percent of projections in tier-2/3 cities. Long construction timelines and land acquisition issues further add to cost pressures. In contrast, private aggregators operate a viable, premium model with higher fares, modern fleets, and strong digital integration.

Recognising the strategic importance of public transportation and rapid urbanisation, the Central Government has periodically launched initiatives to strengthen the ecosystem. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM), introduced in 2005, supported urban mobility through funding for bus systems, Bus Rapid Transit corridors, and fleet modernisation. JNNURM supported the procurement of 15,000 buses with total investments of over Rs. 6,000 crore, making it India’s first major national push for urban bus modernisation. Despite its limitations, the programme laid an important foundation for integrated and sustainable urban mobility in India.

The PM E-DRIVE scheme (2024) promotes electric mobility through demand incentives, supporting over 14,000 e-buses with declining subsidies to boost efficiency. Complementing this, PM-eBus Sewa deploys 10,000 e-buses in smaller cities via PPP, funding charging infrastructure and depots, thereby expanding clean, accessible public transport beyond major metropolitan areas.

About 65 percent of India’s 7,900 plus urban settlements lack master plans, resulting in unplanned growth, congestion, and pollution. As urbanisation accelerates, infrastructure gaps are widening. Effective transport systems require integrated planning, with metro, rail, and bus authorities working in coordination. A balanced approach must align social needs with financial discipline, while expansion should be supported by congestion pricing, parking reforms, and low-emission zones. Strengthening last-mile connectivity through better pedestrian infrastructure, cycling networks, and feeder services is equally vital. An integrated approach is crucial, as India’s ‘Viksit Bharat 2047’ vision depends on its cities already generating nearly 70 percent of GDP making sustainable and efficient public transport key to future growth.

(The writer is a Chartered Accountant with a leading company in Mumbai. Views personal.)