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India to Spend Billions Revamping Massive Rail Network

  • Anjana Pasricha

Passengers travel on an overcrowded train on the outskirts of New Delhi February 26, 2015. India will increase investment in its overloaded railway network to 8.5 trillion rupees ($137 billion) over the next five years.

Passengers travel on an overcrowded train on the outskirts of New Delhi February 26, 2015. India will increase investment in its overloaded railway network to 8.5 trillion rupees ($137 billion) over the next five years.

India will spend $137 billion to revamp its massive rail network - the fourth largest in the world.

The railways ferry nearly 23 million passengers daily and transport 3 million tons of freight over a network that spans 64,000 kilometers. With 1.3 million people on its payroll, it is India’s largest employer.

But although it is called the country’s lifeline, much of the rail infrastructure is creaking and outdated. Accidents claim scores of lives every year, trains are overcrowded, and dilapidated tracks slow rail speeds.

Blaming the problem on “chronic underinvestment for a long time,” Railway Minister, Suresh Prabhu said over the next five years the government will modernize trains, introduce faster trains on key routes, build more rail lines and separate freight corridors.

“The gains to the economy will be immense: better services, improved connectivity for all citizens including the poorer segments of our society, lower costs and improved competitiveness,” Prabhusaid. “Investment in the railways will have a large multiplier effect on the rest of the economy.”

The investment will partly come from savings due to the steep decline in international prices of diesel, which powers Indian trains. Funds will also be raised from multilateral lenders, infrastructure and pension funds and what the government calls “monetizing rail assets.”

Investment long overdue

Experts have commended the new focus. Despite urgent calls for upgrading the network, previous governments preferred to spend funds on introducing new trains to satisfy the need for cheap transportation.

Rajiv Kumar, an economist with the independent Center for Policy Research in New Delhi, said investment in infrastructure is critically needed to stimulate economic growth.

“It was needed yesterday, or it was needed day before, so it is music to everybody’s ears,” he said. “I am actually hoping that investment will exceed the $137 billion dollars. Because that is what is really needed to bring Indian railways at par with other rail systems in Asia and the world, where it was 30 years ago, it was on par, and now it has lagged behind significantly. ”

The government’s push to upgrade infrastructure comes as the government’s latest Economic Survey forecast growth of 8.1- 8.5 percent in the coming fiscal year. That would make India the fastest growing among the world’s big economies.

Saying that India has reached a “sweet spot”, the report said the country is on track to hit double digit growth in the coming years.

The numbers are based on a new method of measuring growth. That method is questioned by some experts, who say although the economy is gaining momentum, many sectors are still sluggish and need time to recover from a long slowdown.

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