Sunday, October 01, 2017

Bullet trains in India

Government has decided to have a bullet train between Mumbai and Amdavad with technology and credit from Japan. It is possible to raise many inappropriate questions like a) do we need bullet trains?, b)are we not foreclosing investment on more important projects because of this decision?, c)will there be enough traffic to make the project viable?, etc.

These questions are beside the point because a)attempts to save time are always welcome; there are limits to speed in our existing non-bullet system, b)"either - or" analysis is justified only if funds are a constraint and c)supply creates its own demand (Say's Law) and therefore generation of adequate traffic to ensure viability need not be a constraint.

The project is sought to be justified by some people on the ground that Japanese credit is so cheap that interest burden is almost nil and therefore we are paying only for technology. This is a fallacious argument because such cheap credit ought to be used for many other projects which is not done now. Have the Japanese arm-twisted India by extending only a two-in-one offer namely bundling technology and credit
(take both or neither)? It does not appear to be so. We must go in for more credit from Japan but not necessarily for the bullet train project. Since the domestic demand for credit is rather tepid in Japan, and India's credit-worthiness is creditable despite the hesitation of international credit-rating institutions, Japan would be happy to lend to India and get a higher rate of interest than paid by Japanese entities.

2 comments:

akji said...

JICA has funded quite lot of projects in India especially our Metro. There are other Japanese funded projects also. It may be a tactical move by the present govt to snub China

MUTHU PRASANTH said...

I think India should prefer hyperloop to bullet train. It's newer, said to cheaper in terms of opex, much faster,... Moreover, it will declutter metros. Now ppl in Chennai have to travel sometimes upto 2hrs to reach their workplace. But a gud hyperloop network will make it possible for ppl from places like kanyakumari to travel daily to Chennai to reach their work place. This will induce the growth of tier 2 and 3 cities.