Detailed analysis of the more important constraints on the transportation sector of the Indian economy. It shows how useful the sectoral approach can be in determining the obstacles to economic development in less-developed countries, as opposed to identifying the obstacles as a lack of technical competence, insufficient domestic savings, a balance-of-payment problem, political instability, and inadequate education and motivation. The rates and costs of Indian railroads, a monopoly directly administered by a ministry of the Indian government, and the government restrictions on Indian highway transportation, a sector that depends largely on private production of motor vehicles, are evaluated. The author suggests that Indian transport policies could be coordinated by the operation of a competitive market force with railway rates reflecting costs (a solution not seriously discussed in India). 35 pp. Bibliog.