Calibration and validation of a national transport computable general equilibrium model for economic impact assessment

Abstract

Infrastructure investments are being undertaken to improve efficiency, economic activity, and growth. Therefore, policy makers are increasingly looking for modelling tools that can evaluate the impact of transport infrastructure on the economy, firms and households from the lens of economic activity and equity. We have developed a large scale national CGE model for India that is calibrated to economic data as well as validated to data observed from the Indian Railways. The novelty of this work lies in three main areas (1) The CGE model incorporates multi-modal transport with road and rail (2) It is the largest model developed so far with 33 regions, 29 industries, 312,530 kms of highways and 126,366 km of Railways (3) Validation of the CGE model. The CGE model was able to predict the tonnage freighted on the Western Dedicated Freight Corridor to within 3.9 % accuracy. The Dedicated Freight Corridor Network (DFC) contributes a 2.94 % increase in the revenue for the railways as well as a 0.08 % increase in GDP. This implies that DFC can directly contribute INR 160 billion to the 2019 GDP. The CGE model distributed the benefits of faster and cheaper alternatives to the entire economy. This was observed during the evaluation of the road projects that were found to improve GDP, household welfare and rail revenue for rail, as well as improved equity.