Railway construction began in India in the middle of the 19th century. Lord Dalhousie pointed out how a vigorous programme of railway construction would result in consolidating the Indian Empire and in attracting British capital and enterprise to India on a large scale.
The experiment of guaranteed company system was first tried for some time. The Government guaranteed to pay interest at the rate of 5 per cent, irrespective of profits, to all companies who stipulated to undertake the construction of railways in India, in consultation with the Government of India, subject to certain powers of control and right of re-purchase of the line.
In spite of the many facilities and concessions that the Government offered to the promoters of railway construction, the offer did not evoke much enthusiasm and railway construction was very slow.
In March, 1869, it was decided to push railway construction by the direct agency of the State itself. For ten years, railways continued to be built by funds raised by the Secretary of State for India in England, on the security of the Indian revenues.
This in a nutshell is the history of railway in India.