Transport, simply stated, means carrying of goods and passengers from one place to another. In the context of trade, transport involves carriage of goods from places of production to centers of distribution and sale, which may be within the country or abroad. Thus, transport facilitates trading activities to create place utility to goods by removing the barrier of distance between production and consumption.
In modern societies the scope of trade has increased not only due to the range of goods produced, but also on account of large scale production and widening of the market geographically. Transport plays an important role in the continuous supply of raw material to the industry and distribution of goods to ultimate consumers. It also contributed to the growth of large-scale industries by facilitating the inflow of raw materials and outflow of finished goods. Transport enables traders to adjust the supply of goods at different places according to changing demand from time to time. Thereby price fluctuations are reduced to the minimum.
Consumers derive benefits from transportation in three ways.
Firstly, a large variety of products manufactured at different places are available to consumers all over the country as well as abroad. This is known as the benefit of diversified consumption.
Secondly, as economics of scale achieved due to large-scale production and extension of markets with the help of transportation, goods are available at lower prices to the consumers.
Thirdly, goods are available at stable prices as transport enables supplies to be moved quickly from surplus to deficit areas.
Importance of Transport Facilities in Economic Development
Economic benefits which are derived from transport facilities may be outlined as follows:
(i) Development of industry and trade depends a great deal on the availability of transport. Easy transportability of raw materials, finished products and also movement of labor, have contributed immensely to the growth of trade and industrial activities.
(ii) Extension of markets through transport development enables buyers to have a wider choice of goods at competitive prices. Extended markets also provide opportunities to the sellers to sell at the most profitable markets. Thus, buyers as well as sellers are benefited due to proper transport facilities.
(iii) International competition is encouraged with the improvements in transport system. It makes markets accessible to sellers and buyers of different countries, and leads to wider choice of quality products.
(iv) Well-developed sea and ocean transport have led to increased imports and exports. This has made it possible for each country to specialize in the production of goods for which it has competitive advantage.
(v) Transport has facilitated economic interdependence of countries, which has, in turn, enabled people to interact, and promote material welfare of the human kind.