Ever since coming to power in 2014, Narendra Modi has been talking of India in 2022, the year when post-Independence India will turn 75. In fact, with the crucial elections to the Gujarat Assembly round the corner, and the government having little to show for its 2014 poll promises, 2022 has now become Modi’s only mantra. And now we know the centrepiece of his 2022 celebration plans – bullet train service from Ahmedabad to Mumbai, almost totally imported from Japan. The choice of the two terminals for this bullet train service could not be any starker – Ahmedabad is the capital of Modi’s Gujarat and Mumbai is the capital of corporate India. Never before has the geo-political balance of India tilted so decisively westward. The Gujarat model has now truly become India’s dominant paradigm of governance.
Japan’s Prime Minister Shinzo Abe came down straight to Ahmedabad – New Delhi did not figure in his itinerary – for the announcement of the launch of the bullet train project. Modi presented this project virtually as a tribute to his personal friendship with Mr. Abe, recalling his close interaction with Japan since his Gujarat days and calling for the establishment of a mini Japan in Gujarat. The Modi government would like us to believe that the project is a veritable gift from Japan with Japan giving India a loan in Yen worth Rs 88,000 crore, repayable over a period of 50 years at an annual interest rate of only 0.1%. For apologists of the bullet train project, a low-interest long-term loan settles the issue, as though this is the supreme consideration for deciding the priorities of the government.
This argument is highly mistaken. The loan from Japan does not fully fund the project. Leaving aside genuine possibilities of cost escalation, the government has to put in at least 22,000 crore, which is not a paltry sum. Secondly 0.1% interest rate may sound very low by average interest rates obtaining in India, but for a country like Japan which is experimenting with negative interest rates to discourage saving and promote investment and consumption, 0.1% is actually 2.5 times the interest rate that accrues to long-term bonds in Japan. And last but not the least important point is that India will have to repay the loan in Yen, which means we have to factor in the exchange ratio between the currencies of India and Japan. Japan being effectively a zero inflation economy and India experiencing an average annual inflation rate of 3%, the repayment will be not according to the existing exchange level but in terms of a steadily depreciating Indian rupee. Assuming an annual rate of 3% depreciation of the rupee vis a vis yen, the repayable amount may well jump to 150,000 crore in rupee terms in 50 years.
Indeed, the bullet train project is more a boon for Japan than India. In recent years China has emerged as a far more attractive competitor than Japan in High Speed Rail (HSR) projects. According to current estimates, the construction cost of the Ahmedabad-Mumbai project will work out to $27.44 million per km. Comparable projects in China cost $17-21 million per km. No wonder, China has beaten Japan to win HSR project contracts in Indonesia, Thailand and Laos. In the present case, the decision to award the project to Japan is purely a political one and India avoided competitive bidding to keep China out. With India having to rely on Japan for much of the project inputs including skilled labour from Japan, the money that Japan is offering to India will start returning to Japan right away and the project will thus help Japan big time in fighting its current spell of economic stagnation.
Cost apart, there is the big question of viability of the project. A study done by IIM Ahmedabad tells us that an average of 88,000-118,000 passengers will have to be ferried everyday to keep the project financially viable. That will mean 100 trips per day. With a projected fare level of Rs 3,000-5,000, finding 100,000 passengers daily between Mumbai and Ahmedabad will certainly be a very tall order, especially when one takes into account the availability of low-cost airlines which are already around to fly passengers for comparable or even less fare in about a third of the journey time of the bullet train.
The biggest question for us concerns not just the viability of the project, but the priority of public expenditure. If we just look at the railway sector, the two burning issues at the moment are safety and passenger amenities. The number of derailments and passenger casualties in railway accidents has assumed alarming proportions. As many as 193 people died in train derailments in 2016-17, the highest in a decade. The situation becomes much more alarming when we include the number of people run over by trains because of unmanned crossings on railway tracks – there are still nearly 10,000 unmanned level crossings in the country which are veritable death traps.
If we focus on rapid modes of urban transport, construction work in proposed metro networks is proceeding behind schedule in almost every case. E Sreedharan, the man credited for the success of the Delhi Metro – the only major success story in the development of rapid public transport in India in recent years – has blamed the PPP model and lack of central investment for this delay. With metro projects running behind schedule and railway safety, infrastructural maintenance/upgrading and basic amenities remaining perennially neglected, Mr Sreedharan has termed the bullet train investment as a mistaken priority.
Take the larger picture of public expenditure and priorities of the government, and we can clearly see that this massive investment for a high speed train between just two cities in western India is coming at the expense of an alarming decline in public expenditure in key areas like education and health. In per capita GDP terms India is way behind the other countries that already have or are planning to have bullet trains. Even Indonesia, the country that comes closest to India has a per capita income double that of India. In GDP terms India spends only 1.2% on healthcare and 3.71% on education (down from 4.4% in 1999).
Five decades ago when Japan became the first country to develop the bullet train (the service between Tokyo and Osaka started on the eve of the 1964 Tokyo Olympics), it symbolised the economic resurgence and technological advance of a country which suffered massive devastation in World War II, including the nuclear decimation of Hiroshima and Nagasaki. But what will the bullet train signify for India in 2022? For the world’s second most populous country with the world’s biggest contingent of the poor, undernourished and unemployed people, it will only signify the brutality of the development model that the Modi government champions so aggressively – bullet trains for the rich, bulldozers for the poor.