Economic Highlights

New Delhi, 18 September 2017

India’s Bullet Train

CAREFUL BALANCING ERA?

By Shivaji Sarkar

India launches the fastest train project – the high speed bullet – with Japanese aid and collaboration at Ahmedabad. It is a dream fulfillment for Prime Minister Narendra Modi, the beginning of the rejuvenation of many companies like BHEL and a wider cooperation with Japan and African countries.

It is a combination of India’s Act East policy with Japan’s Open Pacific initiatives to fashion an Asia-Africa growth corridor. It tries to replace China –OBOR – one belt one road, but at a far less investment and creating a wider Pacific-Asia-Africa growth area. It will be an unhindered commerce from Indian Ocean, beginning on African shores to Pacific Ocean countries. It engulfs Australia, New Zealand, South East Asia and even touches the western costs of Latin America. It may gradually shift the politico-economic focus from the West.

The investment is massive Rs 1.1 lakh crore (trillion) and much of it is coming from Japan as Prime Minister Shinzo Abe assured. Besides, it’s repayable in 50 years at a low interest rate of 0.1 per cent. The 15 agreements that both Prime Ministers signed open up collaboration for security, economy and try to set the global political agenda. It nudges China but does not try to ruffle its feathers. Both India and Japan drop references to South China Sea, an area too touchy for Beijing.  

It brings Delhi and Tokyo closer on issues of terror, corners Pakistan and North Korea that threatened to sink the four islands of Japan archipelago. Importantly, it is a wider security pact, which will boost Japanese arms and other factory production and India gains as Japan invests beyond the bullet train.

Japan spends Yen 100 bn ($19bn) for the Ahmedabad-Mumbai 508 km route. It invests much more for North-East road connectivity (Meghalaya and Mizoram) – Yen 38.666 bn ultimately to connect to the Asia highway to Bangkok; Yen 25.903 bn for Kolkata metro third phase; Yen 16. 825 bn in Gujarat investment promotion programme; Yen 8.5 bn for upgrading environment in Alang and Sosiya ship recycling project and Yen 2.2 bn in Varanasi for an international convention centre at Varanasi, Modi’s constituency.

It also makes the beginning of a Japanese company launching production of electric cars in Gujarat. Additionally, it takes the nuclear energy relationship to a new level. Now no more a full reactor needs to be purchased but Japanese companies can supply components. This is likely to reduce the costs of N-energy production.

The Modi-Abe road show in Ahmedabad opens up a pan-India investment spree that is likely to boost the economy, hopes of creation jobs, perhaps 36,000, and turning India into a factory of the world, as Abe committed to do. Japan, he said “is committed to make in India. If Japan’s high-level technique merges with India’s best human resources, India will become the factory of the world”, pointing out that it is the natural corollary of stronger ties that is to benefit all the countries in the “Indian and Pacific Ocean regions”.

The bullet train project would start with training centre for 400 persons. It will continue even after that, as in the next 50 years the bullet train is likely to connect four major trunk routes. The investment is massive and so is the cost of operation. It takes Indian travelers from low cost fast travel to super high cost at high speed. It crosses 508 km in 2.58 hours and a ticket would not cost less than Rs 5000. But it is expected to turn Ahmedabad and Mumbai into one economic activity area. It would boost BHEL and other companies with new orders for coaches and other equipment.

Recall, there was criticism for Delhi metro that is a high cost project with similar operational costs. It benefits many. But people in Delhi’s slum and resettlement areas prefer to avoid it and travel by bus as they are unable to afford the high fares of metro. The builders of the project have to take the cue. The bullet train that would accommodate 750 to 1200 on a ride should not be seen as a luxury for the super rich.

It also calls for massive investment in the railways for track renewal and other safety measures. The 65,000-km Indian Railway requires immediately over Rs 1 lakh crore annually for the next five years to turn into a safe operational system. Another aspect that has hit the railways is trains skip smaller stations. It adds to the cost of the travel for the poor. India has to have more trains to connect such non-descript places for an inclusive growth. Yet another aspect that needs to be taken care of is that Indian Railways subisidises passenger travel partially through freight operations.

The bullet train would need a new financial model. Japan has it. Japan has smaller super-crowded trains for people who cannot afford the high costs. It has become a socially debatable issue there. Japan is a small country. India is diverse, vast and socially sensitive. The government has to take care of these aspects. For the next many decades, India will have a sizeable number of absolute poor and they must feel that they are part of the progress.

But is the bullet a “chunavi train”, (election train) as the Opposition is clamouring. No, or may be yes. The UPA’s 2009 Railway Budget presented by the then Railway Minister Lalu Prasad Yadav mentioned about it just weeks before the 2009 elections. It was then also criticised as a poll gimmick. It featured almost in every budget after that. The 2009 budget paved the way for the feasibility study of the bullet train. Prior to the 2014 General election the Congress and BJP pledged to introduce high-speed rail. This is a dream of an Indian and political parties cash on it.

However, there are problems as the latest UN report on India’s growth indicates. The project is massive and engulfs decades of dreams. It will need careful balancing of resources and political management to take India to a new higher level where it would have growth, happiness and also would be able to lead the world. In short, it is a new beginning for a churning in the socio-economy of the country. ---INFA

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