Hastily putting together some of my scattered comments on the Bullet Train project into one single note.
Bullet trains are not the kind of infrastructure India needs now. Incidentally, globally nobody wants these expensive bullet trains that are not economically feasible anywhere, including Japan. Reports note that nowhere in the world is a bullet train profitable on its own. To make it profitable, a company that runs it must also develop land around the train stations to make it work financially. India surely has the need for both fast and high-speed trains on a large number of routes across the country. Criticism of the bullet train does not mean a negation of that need.
The ultra-high speed trains (bullet trains) that are not economically feasible do not fit into the kind of infrastructure development required. The bullet train will have to be subsidised for ever. Instead of such trains, by spending equivalent sums, taking loan from multilateral agencies if need be, there are more urgent investment needed in the Indian Railways: a) convert entire rail network into broad gauge within ten years (a task for which currently there is no time frame) b) cut travel times by at least an hour or more on all prime routes and by 4 to 6 hours on major long distance routes and c) reduce the transit time by several hours on all the important goods train routes. This will automatically translate into huge economic gains unlike that for the bullet train. It'll benefit almost everyone - some directly and others indirectly. It will have what is called a multiplier effect on the economy. Of course, that kind of money can be spent on many other sectors as well.
The deal for bullet train helps Japan and boosts the ego of India's supreme leader who craves for grandiose projects that can make headlines, and hopefully history. The reference rate set by the Japanese central bank is actually negative! The economy isn't doing well. There is virtually no market for the 'bullet' or ultra high-speed trains globally despite all efforts by Japan to sell it to big countries. As of now, there are no takers for it. By giving a so-called soft loan (it is not so by Japanese standards, though) at 0.1% interest, they are actually charging a reasonable interest, because their reference rate is negative (-0.1% in July 2017) and the inflation rate is about 0.4, the 0.1% is not low for them. Anyway, they are not interested in earning interest on the loan. Besides, they are not going to transfer the fund as in a usual loan.
The loan is equivalent to the value of goods, services and technology they will provide over the period of the project - as long as it takes, which is supposed to be completed in 5 years (by 2022!). Since most likely all of these are overvalued, the interest earned is irrelevant. Remember, it is a loan only on the books. The loan is effected through execution of the project by the Japanese firms. India will not, in my understanding, have any real access to the so-called loan as a huge sum credited to an Indian account. Only a small part may be in cash - like petty cash. Somehow, all these are not discussed in the obedient poodle media. It has also been overlooked by many critics.
The Japanese are indirectly subsidising their own industry, which they probably cannot do as per international trade agreements. But they can give a loan to India with the condition that India buys everything from them. Note that there is no competitive bidding when it is done like this. So they can, in fact, inflate the costs as there is no way to compare with an alternative. It seems almost everything except the local labour and some contractors, almost everything has to be sourced from Japan - so they stand to make a hefty profit on besides ensuring jobs in their domestic industry even after giving a so-called soft-loan (indirect subsidy to Japan’s domestic industry). So, Japan manages to keep their bullet train factory running. We will buy at highly inflated costs paying back over a very long time. Despite the deferred payments, with the inflated prices, they make big gains. The present Indian Govt will shift the burden of repayment to future governments!
Bullet trains are not the kind of infrastructure India needs now. Incidentally, globally nobody wants these expensive bullet trains that are not economically feasible anywhere, including Japan. Reports note that nowhere in the world is a bullet train profitable on its own. To make it profitable, a company that runs it must also develop land around the train stations to make it work financially. India surely has the need for both fast and high-speed trains on a large number of routes across the country. Criticism of the bullet train does not mean a negation of that need.
The ultra-high speed trains (bullet trains) that are not economically feasible do not fit into the kind of infrastructure development required. The bullet train will have to be subsidised for ever. Instead of such trains, by spending equivalent sums, taking loan from multilateral agencies if need be, there are more urgent investment needed in the Indian Railways: a) convert entire rail network into broad gauge within ten years (a task for which currently there is no time frame) b) cut travel times by at least an hour or more on all prime routes and by 4 to 6 hours on major long distance routes and c) reduce the transit time by several hours on all the important goods train routes. This will automatically translate into huge economic gains unlike that for the bullet train. It'll benefit almost everyone - some directly and others indirectly. It will have what is called a multiplier effect on the economy. Of course, that kind of money can be spent on many other sectors as well.
The deal for bullet train helps Japan and boosts the ego of India's supreme leader who craves for grandiose projects that can make headlines, and hopefully history. The reference rate set by the Japanese central bank is actually negative! The economy isn't doing well. There is virtually no market for the 'bullet' or ultra high-speed trains globally despite all efforts by Japan to sell it to big countries. As of now, there are no takers for it. By giving a so-called soft loan (it is not so by Japanese standards, though) at 0.1% interest, they are actually charging a reasonable interest, because their reference rate is negative (-0.1% in July 2017) and the inflation rate is about 0.4, the 0.1% is not low for them. Anyway, they are not interested in earning interest on the loan. Besides, they are not going to transfer the fund as in a usual loan.
The loan is equivalent to the value of goods, services and technology they will provide over the period of the project - as long as it takes, which is supposed to be completed in 5 years (by 2022!). Since most likely all of these are overvalued, the interest earned is irrelevant. Remember, it is a loan only on the books. The loan is effected through execution of the project by the Japanese firms. India will not, in my understanding, have any real access to the so-called loan as a huge sum credited to an Indian account. Only a small part may be in cash - like petty cash. Somehow, all these are not discussed in the obedient poodle media. It has also been overlooked by many critics.
The Japanese are indirectly subsidising their own industry, which they probably cannot do as per international trade agreements. But they can give a loan to India with the condition that India buys everything from them. Note that there is no competitive bidding when it is done like this. So they can, in fact, inflate the costs as there is no way to compare with an alternative. It seems almost everything except the local labour and some contractors, almost everything has to be sourced from Japan - so they stand to make a hefty profit on besides ensuring jobs in their domestic industry even after giving a so-called soft-loan (indirect subsidy to Japan’s domestic industry). So, Japan manages to keep their bullet train factory running. We will buy at highly inflated costs paying back over a very long time. Despite the deferred payments, with the inflated prices, they make big gains. The present Indian Govt will shift the burden of repayment to future governments!
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