to quantify the efficiency and capacity of the logistics network over the intermediate and long term, thereby enabling the management of transport as a strategic national resource (Tavasszy & De Jong, 2014).

The objective of this working paper is to report on the development of a disaggregated freight‐flow model for India. This model was developed as part of engagement between the World Bank and Government of India on national logistics. The model provides a sectoral and regional disaggregated quantification of total national freight flows and related costs to (1) improve the understanding of the national freight‐flow landscape and facilitate evidence‐based policy formulation and investment prioritization, (2) establish intermodal freight potential along the country’s most dense freight corridor, the Eastern Corridor, and (3) identify and prioritize logistics improvement and cost saving interventions for rail, road and ports on the Eastern Corridor.

Freight flows are a natural and important part of logistics, which is defined as an integrative and systemic support function, applying trade‐offs to determine optimal cost levels in the provision of the transport and storage of goods to address the time and place discrepancy between supply and demand for conforming to customer requirements (Lummus et al., 2001). Transport plays an important part in logistics and for all three of the economies that will be referenced in this report, the United States, South Africa and India; it constitutes more than 50% of logistics costs (64% in the case of the United States [AT Kearny, 2017] and 58% in the case of South Africa [Havenga, et. al. 2016]). The work in this report focuses on transport, but the context within a logistics system for further study should not be ignored.

The next section contains a critical review of literature which provides an overview of India’s freight logistics environment, highlighting the exponential growth in transport sector investments planned across all modes. These investment plans are however not underpinned by a current disaggregated macroscopic freight demand model to facilitate the optimal allocation of limited resources to support India’s growth trajectory. The macroeconomic relevance of disaggregated macroscopic freight demand modeling is therefore discussed. This is followed by an overview of the development of freight demand models to inform the methodology to develop India’s freight demand model (FDM), which is subsequently described. Next, the results of India’s FDM are presented, firstly providing an aggregate overview of the Indian freight transport environment, followed by a description of the Eastern Corridor, including the identification of logistics cost savings potential on this corridor. The paper concludes with a summary and the identification of next steps.

# **Overview of India’s freight logistics environment**

India is the 18th largest export economy in the world (with exports amounting to $292 billion in 2014) and the 13th largest import economy (with imports amounting to $421 billion in 2014). Between 2009 and 2014, exports increased at an annualized rate of 12%, from $165 billion to $292 billion. Over the same period, imports increased at an annualized rate of 11%, from $249 billion to $421 billion (The Observatory of Economic Complexity, 2015).

The optimistic growth outlook of 7‐10% per annum over the next 20 years by the Government of India is, in part, predicated on improvements in the business environment. According the 2018 ‘ _Doing Business_ ’ report, India improved from 134th in 2015 to 100th in 2018. The _Global Competitiveness Index_ published by the World Economic Forum (2015‐16) reflects a similar trend. In the 2015‐2016 report, India jumped 16 ranks to 55th place (although it still ranks seven places lower than in 2007). Per the report, this dramatic reversal is largely attributed to the pro‐business and pro‐growth initiatives by the Government of India. An ambitious reform agenda based on a series of high‐impact initiatives ranging from access to electricity and sanitation to smart cities and transport infrastructure 3