The dedicated frieght corridor will aim to increase the Railways' share of the freight traffic, which has fallen over the decades.
The World Bank said on Wednesday it has cleared a $650 million or Rs 4,135 crore loan for a huge freight rail corridor that will span 1,100 miles across the northern heartland.
Construction of the Eastern Dedicated Freight Corridor will help speed up the carrying of goods between Ludhiana in Punjab and Kolkata in the East, and is part of a series of new freight lines the World Bank says India needs to ease congestion on its network.
"The Indian Railways urgently needs to add freight routes to meet the growing freight traffic in India, which is projected to increase more than 7 per cent annually," Ben LJ Eijbergen, the Task Team Leader for the project, said in a statement.
The loan is the third from the World Bank to help fund the freight corridor.
India's railways, built mostly by the British before independence in 1947, are among the most extensive in the world but have struggled to expand to keep up with demand.
This has hit freight carriers hard as they are forced to carry their goods by road, which is far more inefficient and expensive, to make room for passenger trains on the congested lines. The railway's share of freight has fallen from 90 percent of cargo in 1950 to about one-third today.
Prime Minister Narendra Modi's government, banking on big investment in infrastructure to boost the economy, approved a $137 billion or Rs 8.71 lakh crore investment plan for the railways in February.
© Thomson Reuters 2015