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Japan Pulls Ahead of China in Bid for Indian Rail Deal

India is looking to build its first high-speed rail line, inviting competition from Japan and China. Reuters has the story:

Japan has offered to finance India’s first bullet train, estimated to cost $15 billion, at an interest rate of less than 1 percent, officials said, stealing a march on China, which is bidding for other projects on the world’s fourth-largest network.

Tokyo was picked to assess the feasibility of building the 505-kilometre corridor linking Mumbai with Ahmedabad, the commercial capital of Prime Minister Narendra Modi’s home state, and concluded it would be technically and financially viable.

The project to build and supply the route will be put out to tender, but offering finance makes Japan the clear frontrunner.

Last month China won the contract to assess the feasibility of a high-speed train between Delhi and Mumbai, a 1,200-km route estimated to cost twice as much. No loan has yet been offered.

Japan has been looking for opportunities to challenge China’s position as a leading international developer, and the country suffered a recent loss in that competition: Just earlier this month, China beat out Japan on a rail contract in Indonesia, as it looked like China was simply more willing to take on risk than Japan. So the India contract would be a big economic and political victory for Japan.

Although we don’t expect Japan and China to offer deals unless they expect to profit from them, the geopolitical competition between the two is definitely good for countries seeking infrastructure development. Access to cheap Japanese and Chinese credit will be a big help for emerging markets, including smaller economies that are struggling far more than India.

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  • Jim__L

    I’d be curious to see how much of that $15 Billion is spent on the actual rail service.

    • Andrew Allison

      Also the economic justification for a high-speed line to the commercial capital of the PM’s home state.

      • Jim__L

        It’s probably positive-sum, in the end. It could be that the only optimization of return we’re going to see is going to depend on two wrongs making a right — this may be the only rail line that could possibly be built with any efficiency, as it benefits Modi’s power base so directly. A rail line that stood to benefit anyone else (however much more, marginally) would probably suffer far more, perhaps terminally, from corruption.

        Ugh.

        • Andrew Allison

          Are you saying that the line is being build for the benefit of Modi rather than India? Of course it is (Mumbai to Delhi might, just possibly, make sense). I suppose compared to, for example, the Nicaraguan Canal, the corruption will be merely spectacular. Here’s the thing: what’s really needed in India is a massive investment in regular rail service, so that the people who will never be able to afford a high-speed rail ticket don’t have to ride on the roofs of trains.

    • f1b0nacc1

      Not anywhere near $15 billion, I’d wager…
      “Forget it Jake, it’s Chinatown”

      • Jim__L

        This is the same way that $46 billion invested in Britain by the Chinese only translates to 3,900 jobs.

        I really hope that’s a typo.

        Or, it might be that it only employs City boys. $10M apiece, that’s the going rate, isn’t it?

        • f1b0nacc1

          $10 million apiece is pretty paltry recompense for the ‘average’ worker in the City….grin…

    • Leena

      Rajiv Gandhi once said only 15% of the expenditure meant poor reaches them. Rest all goes into babus and bureaucrats pockets.
      I’d never ride a rollercoaster or a bullet train in India.

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