The much anticipated Modi-Abe summit has finally concluded, and as expected, a multitude
of achievements drawn from the summit have occupied a large section of pages in the
newspapers. The most prominent being The Bullet Train, an investment of Rs 1.1 lakh crore,
to develop a high-speed train network between Ahmedabad and Mumbai. The high-speed rail
network is likely to be fully operational, and serviceable to the public by August 15, 2022,
commemorating 75 years since India gained independence. Over 80% of the total cost (Rs.
88,000 crore) will be funded by the Japanese, in the form of a 'friendly' loan which will be
sanctioned at 0.1% interest over a 50-year- repayment cycle. An additional clause granting a
grace period of 15 years has also been included.
PM Modi has described the loan as being almost free; and most people would not argue
about that. The catch however is that the loan repayment period is 50 years, and in 50 years,
the repayment value will be much higher based on the inflation differential, which is bound to
persist between Japan and India. On the current terms with the Japanese, India can have as
many bullet trains as it wants, but nobody should be misled into believing they are free. For
one, India may have to repay much more than Rs 88,000 crore over a 50-year period because
the rupee would likely depreciate against the Japanese yen over an extended period. In simple
terms, it’s because the exchange rate between the currencies of two countries is determined
by their inflation differential. If India’s inflation rate is average 3% over the next two decades
and Japan’s inflation rate is zero, as is widely anticipated, then it stands to reason that the
rupee must depreciate 3% every year because the rupee’s value is eroding by 3% as against
no erosion in the yen. So, the rupee is bound to weaken by over 60% in two decades. This
means that on a loan of Rs 88,000 crore, the repayment, in rupee terms, goes up to more than
Rs 1,50,000 crore at the end of just 20 years.
One thing that is evident, India is in no position financially to replace the current railway
network with a high speed one. The cost is too much to bear for a developing country like
India. The bullet train project covering just Ahmedabad and Mumbai will cost Rs 1, 10,000
crores. Compare this with former railway minister Suresh Prabhu’s first Budget which
projected a five-year expenditure of a similar amount for network expansion in the entire
country, and the need for a bullet train diminishes. This similar amount could have been used
for strengthening safety over five years. Considering the estimated loan repayment amount,
isn’t it naive to put aside the needs of an entire country to fulfil the desires of a few. The
investment in just one bullet train project is enough for a makeover of the existing network,
with derailments and accidents being a common phenomenon in Indian railways. On one side
we are submerging our future generations into a debt they didn’t ask for; on the other side we
are deliberately neglecting the needs of the current generation.
Railways is still the most preferred means to commute for most people in the country, the
colonial era system is due for a makeover for past many decades and needs suitable
investment from the govt to do so. If only this 1.10 lakh crore was invested in the expansion
of railways, a huge proportion of the population would have benefitted from it; or it could
have been invested in strengthening safety and improving facilities. The bullet train seems
more like a bullock cart; we will have a debt to clear, along with a cracking railway network.
We will be losing our citizens in derailments and accidents at 100Km/Hr, but we will have a
350Km/Hr train to show the first world countries that we are desperate to be like them.
The bullet train project would provide employment to 36,000 people, says PM Modi, but we
lose 30,000 people on an average every year in train related accidents. It would cut short a
500Km or so journey from 8 hours to 3 hours, but every day hundreds of trains get delayed
by more than 5 hours. The project embarks a great relationship between India and Japan, but
will it change the life of a common Indian man; for him the bullet train would just be one of
the many things he cannot afford. The bullet train initially would have a seating capability of
about 700 persons; it would be interesting to see if it can ease out the rush in general bogies
of any other Mumbai-Ahmedabad train. Though, I am not an economics expert but a loan of
such magnitude even with a 0.1% rate must have some backlash for the economy. The rich
would be able to come aboard ‘the bullet train’, while the economy may cling on to a
‘bullock cart’. This is just a viewpoint based on one of the many possibilities that can become
a definite reality, as we always perceived, a debt is never a bright spot in an otherwise
sluggish economic growth scenario. It is not just the debt but also the possible failure or
limited extent of success for the project, which can cause repercussions. If this sum of money
was invested in something which provided assurance of benefit for the citizens, depending on
the extent of success and importance of the projects, such a debt may well have been free of
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