Sly and slow, and so in 1869 the Government of India decided to build new railways as state enterprises. But the speed of railway extension still did not satisfy officials in India and businessmen in Britain After 1880, railways were built through private enterprise as well as through state agency.
By 1905 nearly 45,000 km of railways had been built. Three important aspects of the development of Indian railways should be kept in view.
First, nearly the entire amount of over 350 crores of rupees invested in them was provided by British investors, Indian capital contributing only a negligible share to it.
Second, they were for the first fifty years financially losing concerns which were not able to pay interest on the capital invested in them.
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This loss was made good in the case of privately built railways by the Government of India which guaranteed a fixed return on the capital invested.
While the interest rate in Britain in the 1850s was about 3 per cent, the guaranteed return was an attractive 5 per cent. Third, in their planning, construction and management, the economic and political development of India and her people was not kept in the forefront.
On the contrary, the primary consideration was to serve the economic, political, and military interests of British imperialism in India.
The railway lines were laid primarily with a view to linking India’s raw material producing areas in the interior with the ports of export.
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The needs of Indian industries regarding their markets and their sources of raw materials were neglected. Further, the railway rates were fixed in a manner so as to favor imports and exports and to discriminate against internal movement of goods. Several railway lines in Burma and north-western India were built at high cost to serve British imperial interests.