It’s been just a few weeks since Japan lost a bidding war against China to build Indonesia’s first bullet train. Because of this, the Japanese government is taking precautions to ensure history won’t repeat itself.

Japan is now the first and only country to offer financing for high speed rail in India.

However, the story of India high speed rail and Japan’s support started long ago. Financial support is just the latest development in this long relationship. Japan was involved in every step of the journey, from the initial concept to construction planning.

India, with the fourth largest rail network in the world, will build its first bullet train between Mumbai and Ahmedabad. For over a year, the government has tried to cut down the current travel time of eight hours.

Japan International Cooperation Agency (JICA) worked with Indian authorities by conducting a feasibility study, leveraging their deep expertise in infrastructure development.

The feasibly study concluded that India high speed rail was technically and financially viable in areas which include traffic, tariffs, technology, and number of stations.

Studies proposed a model which would result in the world’s least expensive high-speed service, with a fare priced at just 1.5 times a normal train on the same route.

The ideal number of stations is around ten with a construction period of eight years.


Japan Offers Deal to Win India High Speed Rail Bid

Japan’s offer of financial support did not come as a surprise to Indian authorities. They’ve collaborated for some time now.

However, the loan’s generous terms and low rates did come as a surprise.

Japan stands to give 80% of the US$15 billion project cost at an effective interest rate of less than one percent. This is conditional on at least 30% of the equipment being sourced from Japanese manufacturers.

Why did India receive such a generous proposal from Japan? Mostly because China threatens to become the biggest infrastructure developer in Asia.

Not only did they edge out Japan in securing Indonesia’s first high speed rail, but they also won yet another contract in India. This time, to study the technical and commercial viability of a high-speed train between Delhi and Mumbai. A distance of over 1200km separates these two cities.

Japanese authorities said the offer was already made and their Indian counterparts are considering the deal. They expect a decision within the next few months.

This project is the biggest infrastructure investment which India has ever considered. As such, the government is still cautious about the deal.

A feasibility study was just recently completed. But with such a sweet deal, there’s no doubt Japan is in the lead to build India’s first high speed rail system.

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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