Explanation:

The introduction of railways in India inaugurated a new economic era. There were three major reasons for the British to take interest in its quick development - commercial, administrative and defence.

The railway companies were setup as joint stock companies. English capitalists bought shares in these companies in the stock market in London. In order to encourage them to buy shares in business remote from England and to create confidence in them, the Government of India offered a guarantee of at least 5% interest on their investments.

The objective of introduction of railways in India was to enable imported English manufactured goods to reach the interior of the country and facilitate the collection and export of raw materials and agricultural goods from the interior. To achieve these objectives, it was convenient to have a preferential freight
charge which would allow cheap transport of manufactured goods from port cities to the interior and of agricultural goods from interior to port cities.

The English railway companies imported into India, the engines, the rails, the machinery and even the coal for engines. Hence, India was denied the benefit of such auxiliary industrial development due to the policy of the railway companies to import almost all that was needed by them.