NEW DELHI: India’s government unveiled plans on Thursday to invest $137 billion in its decrepit rail network over the next five years, heralding Prime Minister Narendra Modi’s aggressive approach to building infrastructure needed to unlock faster economic growth.

Over the next year, India will increase investment by about a half to 1 trillion rupees ($16.15bn) including funds raised by market borrowing.

To meet the five-year target, investment will have to speed up even more after that, leaving economists questioning where the money would come from as the government has to rein in its fiscal deficit.

Presenting the rail budget two days before India’s federal budget — also expected to hike infrastructure spending — Railway Minister Suresh Prabhu shied away from hiking passenger fares to finance the upgrades, but raised freight rates.

He said the budget “set the direction of a long and difficult road of reform.”

Modi, who called the rail budget “a paradigm shift” is expected to use Saturday’s federal budget to lay out an economic vision focused on building the roads, power and technology needed to make India a leading global economy.

Prabhu, one of Modi’s trusted economic aides, said he would raise funds from multi-lateral lenders, infrastructure and pension funds, as well as “monetizing” railway assets. He said the railway would not be privatised.

“Over the next five years, the railways have to undergo a transformation,” Prabhu said in a speech that was short on details.

While India has the world’s fourth largest rail network, it has been outstripped by China, which now has more than six times as much track following an intensive expansion and modernisation of its network over the past two decades.

Published in Dawn, February 27th, 2015

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