Economic Evaluation Delhi Metro
Economic Evaluation Delhi Metro
Economic Evaluation Delhi Metro
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Abstract
When I moved to Delhi with my family from Singapore there was one thing that
made me think a lot. The metro in Singapore was such a normal thing in our lives
back there so it was difficult for me to realize why so much importance was given
to it in Delhi. I did realize that the metro has helped the development of Delhi. But
I never understood to what extent it did. With a desire to address this I decided my
research question- To what extent has introducing the metro system affected the
development of Delhi?
Means of Primary and Secondary research were carried out for analysis. I
interviewed several stake holders as part of my primary research. Commuters
could give personalized opinions of the metro. Questions were asked to
shopkeepers, asking them if the level of footfalls had increased since the metros
introduction. Taxi and bus drivers were interviewed to learn about how the metro
had impacted their income. Environmentalists and policemen were interviewed to
learn about the metros social impact.
As secondary sources, I referred to the IB Economics Course Companion (which
was used to keep the discussion relevant to the syllabus) as well as editorial articles
online, which were used for collecting statistical data as well to learn from the
arguments of somebody who expresses an opinion.
Summary of Conclusion
From my research I found that the metro didnt just help Delhiites convenience of
transport, but it also helped create several jobs, save money and time, improve
incomes and much more. But with these benefits came some costs: the high capital
expenditure of developing a metro system and the social impact on the project
affected (displaced) people that negate some of the benefits.
[287 words]
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CONTENTS PAGE
Page Description
Page Number
Title Page
Abstract
Contents Page
Introduction
Research
Conclusion
18
Bibliography
20
Appendix
21
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Introduction
India as a country has been experiencing rapid growth in the 21st century. Such
future growth is likely to come from the industrial and service sectors. Because
most economics activities of these sectors are carried out in urban cities like Delhi,
the state of the urban region is crucial to the future growth of India. Indias urban
population is said to be around 30% of the total population. Many are predicting
that Indias urban population could grow to about 473 million in 2021 and 820
million by 2051, as against only 285 million in 2001 . Therefore, it is imperative
that cities rapidly develop and modernize to cope with the increasing urban
population.
The Indian Government launched the Jawaharlal Nehru National Urban Renewal
Mission (JnNURM) in 2005 in order to bring about comprehensive improvements
in urban infrastructure.1 The aim was to fast track development of cities
(particularly Delhi). The focus was to be on improvements in efficiency in urban
infrastructure and service delivery mechanisms.2
Delhi is a metropolitan region that includes the national capital city, New Delhi. It
India's second-most-populous city after Mumbai, and is also the biggest city areawise. With a population of over 16 million as of 2013,3 Delhi has grown
significantly due in part to the rapid urbanization and evolution of industries like
the textile, Information Technology and jewelry industries. But one of the key
factors of development which has been overlooked by many is the introduction of
the metro system in 2002 which acted as a catalyst in the development of Delhi in
the last decade. Introducing the metro was a significant step to help the city cope
with the movement of ever-increasing population driven by economic growth.
1 Page 1; http://urbanindia.nic.in/policies/TransportPolicy.pdf
2 Page 5; http://jnnurm.nic.in/wp-content/uploads/2011/01/PMSpeechOverviewE.pdf
3 http://articles.economictimes.indiatimes.com/2013-06-11/news/39899448_1_population-literacyrate-cent-growth
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Research
THE EFFECT OF THE METRO ON ECONOMIC
DEVELOPMENT IN DELHI
What is Economic Development?
Economic Development is a branch of economics that focuses on improving the
economies of developing countries.7 Unlike Economic Growth- which is a
narrower concept focusing mainly on the increase in the economys GDP,
Economic Development is much broader as it considers several other aspects that
include the development of environmental sustainability, health, safety, literacy and
human capital. In his 1983 journal Development: Which way now? famous
economist, Amartya Sen implied that Economic Growth is one aspect of Economic
Development.8 Hence, Economic Growth shall also be discussed further on in this
essay.
The Benefits
Introducing the metro had several immediate benefits such as:7 http://www.investopedia.com/terms/d/development-economics.asp
8 The Economic Journal Volume 93, December 1983
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However it is important to realize that there are many other beneficial impacts.
Each of which will be discussed in detail. The benefits of the metros introduction
are important to consider because the significance of it in the bigger picture is yet
to be recognized.
Reduction in Pollution
Over the last decade since the metros introduction, air pollution levels were
recorded to have dropped significantly according to a HUDA (Haryana Urban
Development Authority) official who was interviewed personally. When plans
were made to install the metro, improvement in environmental conditions was one
of the key objectives. Despite the reduction in Air pollution, Land Pollution has
increasingly become a greater concern as crowded areas such as the metro stations
tend to get polluted to a great extent. However the reduction of air pollution
outweighs the increase in Land Pollution (though it should be cut down as well).
Hence, according to the Genuine Progress Indicator (An indicator that measures if
growth has led to an increase in social welfare) 9, the reduction in pollution is an
aspect of economic development as it is a means of measuring social welfare. So
the metro has contributed to development in the city through reduction in air
pollution.
Creation of Jobs
The metros introduction directly helped create several jobs such as operating the
systems and providing customer care for the long run. In the short run, those
involved in construction of the tracks and stations were also benefited by the
income from their jobs. Today as many as 7000 people are directly employed by
9 http://rprogress.org/sustainability_indicators/genuine_progress_indicator.htm
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the Delhi Metro.10 This has helped increase GDP and hence led to economic
growth. However, the growth does not just stop there. With increasing convenience
of transport, several firms have begun to set up more offices closer to the metro
stations. With the convenience of transport ameliorating commuters transport
problems, jobs in these offices closer to the metro stations have become more
appealing. So setting up offices close to the metro system has increased
employment as well.
During a visit to the Sikanderpur metro station (located in Gurgaon), I observed
that after getting out of the metro station several commuters were looking for
secondary means of transport for last mile connectivity. Some means include- autorickshaws, cycle-rickshaws, taxis and buses. Auto-rickshaw drivers were
interviewed in order to learn about how the metro had affected people of their
occupation. Several of them suggested that finding work here was the easiest
during the rush hours, when there would be an abundance of customers willing to
pay high prices. When asked if price discrimination11 was possible, the Autorickshaw drivers suggested that it is not easy with so many other drivers as
competition. But the taxi drivers felt that first degree priced discrimination is
common among taxi-drivers.
I had learnt that the major employers also provide a free shuttle bus to and from the
Sikanderpur metro station and a business district (called Cyber City) where
majority of commuters to Sikanderpur station work.
By the introduction of the metro, we can see that several jobs are being created and
the economy indirectly benefits as a whole.
11 Price Discrimination is the action of selling the same product at different prices to different buyers,
in order to maximize sales and profits.
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Million; Noida Extension cost 8,400 Million; Badarpur extension cost 40,120
Million and the Airport line cost 30,760 Million) has helped kick start a positive
multiplier effect. The total amount of money invested was 285,550 million.12 The
incomes of people directly involved in the construction of the metro would
increase. And then when they spend part of their income on other goods and
services, the income levels of those producing these goods and services would
increase. If the MPC (i.e. Marginal Propensity to Consume) of people living in
Delhi is 0.9, the metro workers would increase their spending by 0.9 times. Their
spending would then go on to become the income of those providing other goods
and services. The provider of these goods and services would again save a part of
their income (10%) and their expenditure would go on to help create jobs and raise
income levels of some other industry/sector. The multiplier process would keep on
raising income levels and jobs till the economy reaches equilibrium- which is when
the injections become equal to the leakages. An eventual increase in income levels
would amount to 10 times the initial government expenditure.
Table 1
Builders
Industry 1
Industry 2
Industry 3
Industry 4
Industry 5
* The figures above are given in
Income
285.5500
256.9950
231.2955
208.1660
187.3494
Spending
285.55
256.9950
231.2955
208.1660
187.3494
168.6144
Saving
28.5550
25.6995
23.1295
20.8166
18.7350
billions.
*the amount of savings and expenditure may vary from person to person. The table above is just to serve as an example.
12 http://urbanindia.nic.in/programme/ut/Delhi_MRTS.pdf
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As seen in the diagram above, the government is shown to be adding to its initial
expenditure. The additional investment into the economy is for the building of the
metro. As a result, the savings curve extends to the right until it reaches the line of
Initial Govt. Expenditure+ Expenditure on metro. At this point, it can be seen that
with an increase in government expenditure (shown on the Y-axis), the income
levels (shown on the X-axis) in the economy have increased much more
significantly.
Stakeholders - Commuters
During a visit to a busy metro station, several commuters were interviewed and
were given questionnaires. The questionnaire form is given in Appendix.
A total of 58 commuters were kind enough to answer the questionnaire above. The
results of the questionnaire are given below:
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Chart 1
28
10
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Chart 2
13
Daily
8
Weekly
37
Irregularly
From this sample survey it is evident that more than 60% of the commuters use the
metro everyday while approximately a third of the commuters use the system
irregularly.
Q.4. How much time do you save on average (per day) by travelling by the
metro?
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Chart 3
18
19
Less Than 30
min
30 min to 60
min
More than 60
min
15
No Difference
The responses to this survey questions shows that nearly two-thirds of the
respondents saved time by using the metro although the saving differed across the
participants. While nearly 57% of the respondents saved less than an hour about
10% of the respondents saved more than hour each day by taking the metro.
Q.5. How much money are you saving by using the metro per day?
Chart 4
20
19
19
This question is a direct measure of the financial benefits the commuters are
realizing by using the metro against other modes of transport to commute.
Although a third of the respondents indicate no cost savings, the remaining twothirds are able to save a significant sum of money each day which enhances their
monthly disposable income.
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4 2
<2 lakhs
2-10 lakhs
52
>10 lakhs
Vast majority of the respondents who participated in this survey (90%) belong to
the lower-middle income group who are required to pay income tax. It is important
also to note that only about 7% of the upper-middle income group forms the
commuter mix using the metro.
The Question 7 has four parts and was designed to gauge what intangibles drive
the commuter choice that lead them to choose the metro as opposed to other modes
of transport.
Q.7a. To what extent do you find the metro affordable?
Chart 6
2
22
Highly
Moderately
34
Lowly
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This question is a measure of whether price is a factor that could have affected the
number of commuters using the metro. It is interesting to learn from this survey
that only 2% of the respondents find that the metro is unaffordable. On close
scrutiny it was revealed that both these respondents belong to a low income group.
11
19
Highly
Moderately
Lowly
28
Apart from the time and economic benefits, a major driver for commuters to
choose the metro is its comfort. About 80% of the respondents find the metro
comfortable.
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3
Always
19
Often
Rarely
36
One of the key factors in the success of the metro systems is the reliability and ontime performance so that people can plan their time effectively. The responses to
this question clearly indicate that about 95% of the respondents find the metro
system reliable.
Q.7d. To what extent do you find the metro Safe?
Chart 9
4
22
32
High
Moderate
Low
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With Indian roads regarded as one of the most unsafe in the world, a strong factor
that drives commuters from road travel to metro is the safety of this mode of travel.
The survey findings indicate that more than 90% of the respondents feel the metro
system is safe.
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would travel by metro. This theory was further enhanced when interviewing a
senior traffic-policeman who suggested that the number of road accidents has
decreased significantly due to a decrease in the number of vehicles on road.
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Conclusion
From the foregoing research and survey investigations, I found that the inception
of the metro didnt just help Delhiites with greater convenience of transport, but it
also imparted a host of economic benefits by creating several jobs, saving money
and time, improved incomes and much more. From my research investigation I
conclude that a metro system is:
Sustainable - Requires 1/5th energy per passenger km compared to road-based
system
Eco Friendly - Mitigates air pollution in the city and diminishes the traffic noise
level
Eases Congestion - Occupies no road space if underground and only about 2 meter
width of the road if elevated
Economic activity Leads to better land use planning, attracts investments and
creates jobs directly and indirectly
From the sample survey results and interviews with the project affected
stakeholders, I conclude the following:
- The inception of metro helped in commuters migrating from private
transport to more efficient metro (public transport) thereby easing traffic
congestion
- Two-thirds of the commuters save significant time by taking the metro for
their travel
- Two-thirds of the commuters also reported substantial cost saving each day
by using the metro
- Ninety percent of the metro commuters in the sample survey are in the 2-10
lakhs annual income bracket. This indicates that high-income groups are still
not making the switch to public transport
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- The commuters who participated in the survey rated metro very highly as
being affordable, reliable, safe and very comfortable. The above findings
help in showing the positive impacts of the metro.
However, as the research question suggests To what extent has introducing the
metro system affected the development of Delhi? it is essential that we look at
the impact of the metro with a holistic approach. Therefore, some negative effects
were also found.
The amount of resources used to construct the metro was humongous. It is
estimated that approximately 285,550 million was spent on the construction of
the Delhi metro. For the first three phases, it was found that around 40,000 trees
were cut down to enable the construction of the metro system. Government
inefficiency meant that they have mostly failed to live up to the condition of
planting 10 trees for every tree cut. One also needs to bear in mind that
alternatively, a high capacity bus corridor system could have built at one tenth the
cost of a metro. It can be argued that the economic resources could have been more
effectively used. Again it is debatable whether a high capacity bus system would
have matched the standards and the effectiveness of the metro. When interviewing
commuters in a crowded metro station, several of them voiced their frustration of
having to find a secondary means of transport after disembarking from the metro in
order to reach their destination.
Therefore, looking at the metro project holistically, it can be seen that it aided the
economic development of the region but there was a massive opportunity cost
involved in its construction.
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Bibliography
Websites:
1. "Taking Note of Road Deaths in India." Http://www.livemint.com/. N.p., n.d.
2.
3.
4.
5.
6.
7.
8.
Books/ Documents:
1. Delhi Metro Rail Corporation Limited, Annual Report 2011-12
2. The Economic Journal Volume 93, December 1983
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Appendix
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A
popular metro station in the Gurgaon region
Auto Rickshaws
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Amardeep was kind enough to share his thoughts on the effects the metro had on
the lives of auto drivers.
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