Businesses in the western region are the most optimistic about export freight demand Businesses already transporting more than 76% of goods via railways expect it to increase further.
- More than 40% of businesses expect cost of transportation to increase in Q2 2022
- Businesses in the western region are the most optimistic in Q2 2022
Dun & Bradstreet, a leading global provider of business decisioning data and analytics, has released the 2nd edition of its all-India survey, Railway Freight Activity Optimism Index (RFAOI), in collaboration with Jupiter Group, a premier manufacturer of railway wagons, passenger coaches, wagon components and castings.
The RFAOI survey was conducted to measure the optimism levels of rail freight users (industry players and logistics service providers), to assess whether rail freight activity in India is expected to improve, remain steady or decline. The index is composed of 14 sub-parameters across four sub-indices – optimism around factors of supply, operational efficiency, investment, and demand.
Key findings
Railway Freight Activity Optimism Index (RFAOI) for Q2 2022 stands at 63, three points higher than the previous quarter; despite the uncertainty posed by the Russia Ukraine war and the eminent risks weighing upon the pace of recovery of businesses (global inflation and swift change in monetary policy)
The survey further highlights that businesses in the western region are the most optimistic in Q2 2022 (optimism index at 65). Both large and medium scale businesses are more optimistic about export freight demand compared with small and micro players.
Dr. Arun Singh, Global Chief Economist, Dun & Bradstreet said: The improvement in consumer sentiment and resumption of business activities have helped improve the optimism level of businesses transporting goods via railways. Our survey finds optimism level to transport goods via railways have increased in Q2 2022 from the previous quarter. We believe trade and logistic activity to gain momentum as India successfully executes more FTAs (foreign Trade Agreements) with other countries. However, soaring logistic costs and overall inflationary pressure, given rising fuel prices and depreciating rupee, might have impacted optimism level for import freight demand, which continues to be the lowest in Q2 2022 amongst all the parameters surveyed. Going forward, freight cost is likely to remain elevated or go up as 40% of businesses expect cost of transportation through railways to increase in Q2 2022.
Vivek Lohia, Director, Jupiter Wagons said: “Railway freight activity is expected to gain further traction in Q2 2022. We can gauge from the survey that businesses are inclined towards increasing their share of goods transported through railways, but they also anticipate cost of transportation through railways to increase. Western region is the most optimistic for most of the survey parameters considered for the rail freight activity optimism index. Two areas of concern have emerged i.e. optimism level for availability of wagons and transit time has fallen from the previous quarter. However, even though optimism towards availability of wagons have fallen optimism for utilization of wagons has increased and this is higher than containers compared to last quarter. As we track the pulse of the business activity across different size and location in India every quarter, we aim to highlight the various challenges businesses perceive to transport freight through logistics by gauging the optimism level for 14 parameters relevant for rail freight logistic sector”.
Key findings of the four sub-indices of RFAOI
Optimism around factors of supply
- Optimism for factors of supply chain increased at the slowest pace (one percentage point gain) in Q2 2022 compared to the other three segments.
- Optimism level for availability of wagons fell by 4 points in Q2 2022 from the previous quarter.
Optimism around operational efficiency
- Optimism for operational efficiency in Q2 2022 improved by three points to 64 from Q1 2022.
- In the survey, Businesses are most optimistic about loading and unloading of goods with
(optimism index at 69) and least optimistic about transit time (optimism index at 57)
Optimism around investment activity
- Optimism level for investment activity is the highest at 66 in Q2 2022; the optimism level increased most by six points in Q2 2022
- Businesses are most optimistic about loading and unloading of goods (optimism index at 69) followed by investment for mechanization (optimism index at 66)
Optimism around demand
- Optimism for freight demand improved quarter on quarter yet remains lowest among all the four sub-indices in Q2 2022 at 59
- Businesses are more optimistic about export freight demand (optimism index at 62) compared to domestic freight demand (optimism index at 60) in Q2 2022. Indicating strong export growth momentum to continue in Q2 2022. • In domestic freight demand, optimism level for import (optimism index at 57) and captive trade (optimism index at 58) increased by ¬five and six points compared to optimism for domestic trade activity which increased only by two points
