Is bullet train a good project for India?

It is indeed a good project. And here is why:

Does our country need infrastructure? Yes

Does infrastructure help in boosting our economy? Yes

Does infrastructure help in a better standard of living? Yes

Does India have money to build world-class infrastructure? Sadly, No

So what should we do? 

Let me know explain this with an example that is more relatable. Let’s say I inherited a business of manufacturing TVs that was started by my grandfather. I know I have a good product and it sells fairly well in the market. However, over the years, my grandfather & father stopped paying adequate attention to it. As a result, people started taking advantage of that situation. They started skipping processes, didn’t maintain the machinery, became lazy, started stealing and making under the table deals with suppliers etc, ultimately leading to a massive loss on my Balance Sheet.

Now, as an owner, I have two choices. Bear the losses and shut the factory down. Or reach out to lenders like foreign banks and present my future plan. Since I am still young and believe in my product, I decide to opt for the latter. When I start making my business plan, I realise that the TV market has changed over the years and in order to grow, I will have to stop producing Cathode Ray Tube TV and switch to making LED TVs. I calculate that to do that, I will require a capital investment of Rs. 100 Crores.

Do I have that kind of money with myself? No.

Will this money help my factory turnaround, generate employment, build my reputation again? Yes

So I do the next best thing, which is to make a business plan and take it to that foreign bank

This foreign bank chairman, who has sizeable funds with him, has heard of my brand and has even used my product earlier. He also understands the business of manufacturing LED TVs as he was himself doing it before becoming the bank chairman. So he listens to my plan, feels extremely confident about it and extends the loan to me at an extremely low-interest rate.

Remember, by doing that, he isn’t doing me a favour cause he will earn interest on it. Also since his own country has been going through deflation for the past 20 years, the government actually charges him interest if he doesn’t lend the money. He realises that my company still enjoys high credibility (so fewer chances of bad debts) and the plan that I have presented give him a stream of revenue that didn’t exist.

What has happened here?

Did I have the money to invest in making LED TV? No

So the question of making a decision between money would have been better spent on making cars than LED TV doesn’t arise.

Could I have asked this foreign bank chairman for a loan to manufacture cars? Perhaps but he may not have been interested as he doesn’t understand that business and would have increased the interest rate or refused to extend the loan

Do I have to make the payment back up front? No, I will do it only after I start selling my TVs again.

Is that so bad? No cause without that my company would have shut down and there would be job losses. Now I am paying only after I have started earning and after a certain number of years, the asset will be my property.

Critics are saying that this money would have been better utilized by improving existing infrastructure of our country. This is fundamentally incorrect as firstly Indian government isn’t spending its own money and therefore the question of where to spend doesn’t arise. Secondly, the problem of existing infrastructure being broke is more because of corruption (inefficient contractors winning tenders) and good people not standing up against it

Unlike the Middle East, that struck gold through Oil and then wisely invested that money in building robust infrastructure, India isn’t in that position. Over the last 70 years, it has been systematically been looted by politicians, bureaucrats, businessmen and traders. We are a fiscal deficit country implying that our expenses are more than our income.

The best way to grow our country is to attract investments. And we need invest in multiple sectors and not just transport. This bullet train will reduce travel time, foster trade, make cost of business cheaper, and uplift our quality of life and all this in a manner that is convenient to your pocket.