India’s new rail minister on Tuesday proposed allowing foreign investment to modernize the country’s cash-strapped state railways. Sadananda Gowda also outlined plans for a network of high-speed trains, with the first project slated to connect the financial capital, Mumbai, with the home state of new Prime Minister Narendra Modi.
The ambitious proposals unveiled on Tuesday as part of the annual rail budget indicated Modi’s government intends to move quickly to follow through on reform promises. Investors have been looking for signs as to how bold the new government, which swept to power in May, will be in implementing its agenda to revive economic growth. Some of its changes could be politically unpopular. Another test will come Thursday when the government unveils its first national budget.
Modi said the rail plans “indicate where we want to take the railways and through that where we want to take India.”
Gowda on Tuesday said that fare hikes alone cannot pay for the upgrades needed for the railways, which run on dilapidated tracks and with ancient rolling stock. Poor infrastructure is blamed for a large number of Indian rail accidents. He said partnerships between the government and private companies should be used for system upgrades, though operations would still be handled solely by the government. Allowing private investment in the network would require Cabinet approval.
India has one of the world’s largest railways, which transports 23 million passengers a day. Indian Railways is one of the world’s biggest employers with more than 1.3 million employees. The network lost 300 billion rupees ($5 billion) last year.
A 2012 government-sponsored report said the railways need nearly 5.6 trillion rupees ($93 billion) over the next five years to upgrade infrastructure.
One of the Modi government’s first acts when it took office was to raise rail passenger fares by more than 14 per cent, an unpopular move that was partially rolled back after an outcry. The backdown on train fares indicated the tough balance the new government must strike in trying to shore up loss-making state companies and narrow India’s worrisome fiscal deficit.
Millions of Indians have become accustomed to subsidized food, fuel and fertilizer and any cuts in those subsidies in Thursday’s budget would likely put a dent in the new government’s early popularity. Likely opposition to any sweeping change was evident in the opposition Congress party’s vehement response to the railway budget.
“It appears that this is not a rail budget, but a scheme to privatize Indian railways,” said Manish Tewari, a Congress party spokesman. The Congress party has dominated Indian politics for all but a decade since the country threw off British rule in 1947. It was in power for 10 years before losing the most recent elections in May by a landslide.