Setting up a railway system in British India, criss-crossing the vast expanse of the subcontinent , was first proposed in 1832. Rail travel was still in its infancy in Britain itself, but the East India Company saw clearly the benefits of developing an extensive rail network. After over a decade of inaction on the matter in 1844, private entrepreneurs were allowed to launch a rail system by Lord Hardinge, the Governor-General of India.
British capitalists,who were not so keen to invest in the ambitious project, were encouraged by the British Government to invest in Indian Railway companies . The incentives included an annual return of 5% during the early years of operation, free use of land for the railway companies and a 99-year operating contract. Once finished, the company would be transferred under the Government ownership, yet the operational control will be vested in the original company. By the year 1845, two companies were formed, 'East Indian Railway Company' and the 'the Great Indian Peninsula Railway '.
The first train in India was run the Great Indian Peninsula Railway between Bori Bunder, Bombay and Thana on 16th Apr 1853 , a distance of 34 kms. A short journey for the illustrious passengers of the train, a giant leap for the Indian Railways which grew into a gigantic 63,000 km after 150 years from then.
In 1880, the network to about 14,500 km , mostly developed around the three major port cities of Bombay, Madras and Calcutta.
Railway Board was formed in 1901 under the guidance of the Deptt of Commerce and Industry, but the powers were vested still in the Viceroy .
Indian Railways played a vital role in the expansion and maintanance of British Raj in India. British governement used assets of Indian railways extensively in the two world wars to their advantage.
India inherited a total of 55,000 km of British Indian railways, with about 40 per cent of the railway line passing through Pakistan. New construction had to be undertaken to maintain the lines operational as many lines had to be rerouted through Indian territory. A total of forty-two separate railway systems, including thirty-two lines owned by the former Indian princely states were amalgamated into the Indian Railways.