Railways are treated as the lifeline of India, as they play a major role in the transportation of passengers and goods due to their cost effectiveness and large network. From 1970 to 2014, passenger and the net ton kms increased by a factor of 4 and 10, respectively. This significant increase in transportation demand was met by the transition of locomotives from steam to diesel and electric in the last few decades, as better energy efficiency led to lower operation costs. For policy making, emission inventory of locomotives is essential for better understanding of the relation between air quality and the choice of traction. However, the available national emission inventories developed by the top-down approach using the national fuel consumption statistics contain huge uncertainties due to non-consideration of activity data, such as age, power and type of locomotive. To estimate this uncertainty, for the first time, a bottom-up approach using link specific activity data was used to develop the emission inventory for North-eastern Indian states. In comparison to the bottom-up approach, the emissions calculated by top-down approach were lower in case of passenger transport (246% for NOx) and higher (36% for NOx) in case of goods transport. Further analysis indicated that, even though the estimated emissions were sensitive to emission factors used, role of activity data was more significant. Assuming that this difference is representative for other parts of the country, a national emission inventory for Indian Railways was developed using a modified top-down approach. Using the newly developed emission inventory for railways and the existing fuel based emissions for roadways, it was estimated that if road based freight transport is switched to rail, an average decrease of 58% and 50% of NOx and CO2, respectively can be achieved.