With the hike in Rail freight and passenger fare the leading industry bodies are expecting that along with this there would be a concomitant improvement in both the quality and safety of services.

"We of course hope and expect that there will be a concomitant improvement in both the quality and safety of services offered by Indian Railways," said Sidharth Birla, President, FICCI.

Reacting to the rail fare increase announced by the government for both passenger and freight traffic, Birla said, "If tariffs had been incrementally attended to over the years, to match rising expenditure and attending to the needs of this crucial link in our national infrastructure, an increase of this magnitude in one go would not have been necessitated.

The government Friday raised freight rates by 6.5 percent and the railway passenger fares by 14.2 percent in all classes effective from June 25, a decision strongly slammed by opposition parties who termed the move anti-poor and one that would lead to inflation.

The new passenger fares and freight rates aimed at mobilising resources for the cash-strapped Indian Railways come just days after Prime Minister Narendra Modi warned countrymen to get ready for some "bitter medicine" needed to revive the economy and ahead of the full railway budget next month.

Commenting on the same, Chandrajit Banerjee, Director General, CII, said, "Railway freight rates have been increased with a view to resource mobilization, which is today the most critical requirement for the Indian Railways. Without adequate resources, Indian Railways will not be able to afford its modernization, capacity addition & safety plans".

CII has urged the Government that FDI in Railways should be given top priority. Additionally, resources can be mobilized from inviting multilateral funding agencies to participate in railway projects, better utilization of railway land, and creation of a Rail Asset Leasing Authority.

"Tariff adjustments can contribute to resource mobilization to a limited extent. While inevitable, the Industry, currently reeling under a low growth scenario, can ill - afford the freight increase especially on bulk heavy industries like Steel, which contributes about 20 percent of the freight revenue of Indian Railways and are already under stress," he added.