As part of its wish-list for the upcoming Rail Budget, the trade body has also proposed developing technology as well as ramping up rolling stock production.
"If indigenous technology has to be developed there is need to have long term contracts with technology providers. This will enable the manufacturers to invest in technology, machinery & plant, training & skill development," ASSOCHAM said in a statement.
It added that the country's duty structure should encourage foreign investors to manufacture in India.
"PPP frameworks should be developed for manufacturing of high-tech rolling stock, locomotives, passenger coaches, track equipment, and signaling infrastructure with technology transfer arrangements to enable indigenous technology development," it said.
To augment capacity, emphasis should be on leveraging existing infrastructure of railways by small incremental investments which will give immediate results, it added.
Rail Budget will be presented on July 8.