The common refrain from most critics of Modi these days is to ding the Bullet Train being constructed between Mumbai and Ahmedabad by saying – When India is so poor, and the Indian Railway system is so bad, why go for the Bullet Train. Implying indirectly – that India and Indians are not worthy of a train system that is fast, convenient and world class, BECAUSE (1) we are poor and (2) we have a British legacy train system that is huge, unmanageable and inefficient.
Poverty and Bullet Train
One needs to remember that as a result of this Bullet Train project 20,000 construction workers will find jobs for the next 5 years. After that 4,000 permanent jobs will be created for operating the system!
The Mumbai-Ahmedabad high speed rail project that was launched in Ahmedabad on Thursday by prime minster Narendra Modi and Japanese prime minister Shinzo Abe, has the potential of creating 20,000 direct and indirect employment opportunities, according to a report by State Bank of India’s research team. After the commissioning of the project, direct employment of 4,000 employees will be created for the operation and maintenance. Further the project is likely to generate about 16,000 indirect employment opportunities
This charge of Poverty Vs High Tech has been the rant of every decade when India tried to do something. Let us go in the past and look at the record of these Poverty Rudaalis.
1960s and ISRO: The Indian Space Research Organization was launched. On Aug 15, 1969 to be exact. The same rant was repeated then. “When a country is poor, why spend crores on satellites which will benefit no poor person”. Remember that launch of 104 satellites in one shot this year? Forget the pride aspect of the whole feat. Do you know how much money India – the country – made from this launch? A cool USD 300 million! In 2015, India had launched 45 satellites until July 2015 – and made $100 mn from them! Earning millions of dollars of revenue from the launches is a regular occurrence for the Indian space agency now. Who benefits from increasing Indian GDP? If the Government if honest – and does not fill its own pockets – the moneys logically should and do go to the public goods creation!
1980s and the Maruti Suzuki: India had a car revolution with the coming of Maruti Suzuki. Yes, the roads were bad. Yes, the infrastructure was terrible. The poverty was damning. But with the coming of Maruti Suzuki, a revolution in cars started! TN Ninan shared his frustration during that time of one of the stories with the same socialist sentiment.
Even in the mid-1980s, India was in a funny socialist mindset. If you did an upbeat story on the rise of India’s middle class, most pundits simply rejected the good news, as though it was nothing more than boosterism. But there was an overwhelming response to a detailed report on government waste – except that nothing has changed in the 15 years since. Another memorable cover story was on the mess that was India’s telephone system.
One of the editors had a brainwave for the cover visual: a battered phone instrument (it was banged on the floor till it broke!) bandaged clumsily and knotted up with wires. Today, we finally have a decent phone system, though it’s still not world class.
Today, thanks to the world-class Auto OEM industry that came up due to the ecosystem created by Maruti Suzuki, India’s automotive industry contributes $93 billion – 7.1% of the national GDP!
For every vehicle produced, direct and indirect employment opportunities are created with employment of 13 persons for each truck, 6 persons for each car and 4 for each three- wheeler and one person for two-wheelers. The $ 93 billion automotive industry contributes 7.1% to India’s GDP and almost 49% to the nation’s manufacturing GDP (FY 2015-16).
The employment created for each vehicle produced in India is huge!
2000s and the Delhi Metro: The introduction of Delhi Metro. For someone who grew up in Delhi, I could have never believed that as congested as Delhi was, the city could ever have a sophisticated train system such as the Metro. And given how people were – with bad civil behavior – one was always skeptical of how long such a system could remain even relatively clean. But boy, was I wrong! In all my travels, I have not seen anyone eat or drink on the train. And the stations are always clean. This is despite that the stations do NOT have a garbage can! The investment in the Metro system has been huge. And its critics equally high! But ask the local Delhi-ite on the impact of Metro in his / her life and they will explain it eloquently. Here is however, a detailed discussion of how Metro has helped the city and its environment – basically how the liveability aspect has improved – its circa 2007 study though! Imagine the benefits now that the train network has expanded.
Conducted by the Central Road Research Institute (CRRI), the study reveals that the Metro railway has helped save 33,000 tonnes of fuel and prevented creation of over 2,275 tonnes of poisonous gases. Also, it has helped commuters in the city save 66 minutes every day on an average and reduced the daily vehicle demand.
The report adds: “The Delhi Metro’s Phase-I environmental and social benefits will help recover the full cost of this phase by 2013. The completion of Phase-I of the Delhi Metro Project covering 65 km has resulted in reduction in road accidents, improvement in road traffic conditions as also the environment.”
“If the social and economic benefits are quantified then the Delhi Metro Rail Corporation has helped the city of Delhi in saving Rs. 1,167 crore already, which will increase to Rs. 2,072 crore by the end of 2007.”
So, we can keep crying hoarse about how technical advancements will hurt the country’s fight against poverty – but think about it – what is the best way to fight poverty? Improve Economic Returns. Increase the GDP. And, make its increase and impact equitable. The large companies and the rich will find a way to buy a house or an office in Mumbai anyways. What about the small-time guy living in Anand, who wants to do business with clients in Mumbai? Either he has to fly or go via train spending hours. If he could get access to that market sitting at home, isn’t that a distribution of earning opportunities?
If the country had to create a network of transportation which will bring about distribution of opportunities, then there was no better city to use as the base other than Mumbai! And the more cities its connected to on a daily basis, the better it is for the economy. Right?!
Now let us look at how and if the use of High Speed Railways has impacted the economies of the countries it has been brought to.
Impact of High Speed Rail (HSR) or Bullet Train on Chinese Economy
India is not the only country which is investing in the High Speed Railway (HSR) system – the Bullet Train. Many countries are spending billions to get this infrastructure into their cities and towns.
Governments around the world are spending lavishly on the construction of high-speed rail. China has invested $300 billion to roll out over 11,000 kilometers of high-speed rail track across the country. The state of California will spend almost $1 billion just to investigate the possibility of a high-speed train between San Francisco and Los Angeles. The UK is planning high-speed train connections between Manchester-Birmingham-Leeds and London. Japan’s famous Shinkansen high-speed rail network contains 2,387 kilometers of lines, carries 353 million passengers per year, and continues to be expanded to more remote parts of the country.
By contrast the Mumbai-Ahmedabad Bullet Train will take $17 bn to be constructed.
Let us look at the Chinese experience, for example. A 2014 World Bank paper said that China’s high-speed rail traffic increased from 128 million trips in 2008 to 672 million trips in 2013 (over 5 times increase in 5 years!). Over all these years, these HSR trains have done well over 3 billion trips. It is also instructive to know that the fare cost of the high speed railway is between seven and 10 cents per kilometre per person in China, compared to two or three cents for traditional intercity rail.
How does the Bullet Train help an economy? Studies have shown that the HSR improves the economy in many ways. This study by researchers from Ohio State University, Chinese Academy of Sciences, George Mason, and USC shows that investment in HSR has provided stimulus to economy and social welfare!
This study investigates the impact of high-speed rail investment on the economy and environment in China using a computable general equilibrium (CGE) model. The analysis is implemented in a dynamic recursive framework capturing long-run capital accumulation and labor market equilibrium. A national level impact was simulated through direct impact drivers including land use conversion, output expansion, cost reduction, productivity increase, transport demand substitution and induced demand. The results suggest that rail investment in China over the past decade has been a positive stimulus to the economy, while the effect on CO2 emissions generation has been large. Overall, the economic impacts of rail investment are achieved primarily through induced demand and output expansion, whereas the contribution from a reduction of rail transportation costs and rail productivity increases were modest. In addition, negligible negative impacts were found from land use for rail development and the substitution effect among other modes. Emissions reduction from substitution of rail for other modes was small and offset by output expansion due to lowered rail transport costs and induced demand.
For China, now, let us look at the impact very specifically of its impact on the Chinese tourism industry. It is instructive on how the High Speed Railway system in China has impacted its tourism industry.
Faster trains with efficient services can expand and improve the Chinese tourism industry, which enjoyed year-on-year growth of 15.9 per cent, totalling 423.3bn yuan ($61.78bn) during the recently ended Spring Festival holiday week. And the high-speed railway has opened up previously remote places to tourists, expanding business opportunities. In 2016, the revenue of the domestic tourism sector reached 3.9 trillion yuan, equivalent to more than 5 per cent of Chinese GDP. And in the southern Chinese province of Guangdong, tourism revenue was equivalent to nearly 15 per cent of provincial GDP.
It has enhanced the Chinese GDP by 5%!
Rich Countries do NOT create Infrastructure, Infrastructure Creates Rich Countries!
The whiners who decried India’s space program or those who decried the Delhi Metro are nowhere to be seen. In fact, it is a very safe bet that every critic of the Delhi Metro uses it and cannot live without it today. Also, everyone who criticized the Maruti Suzuki has used a Maruti car at some point in his/her life!
India missed the Industrial revolution. When the industrial revolution happened in Europe, it wasn’t a rich society then. IT was quite poor. Ditto for Japan when its own infrastructure was built. Infrastructure is not built in rich countries. Rather Infrastructure makes a country rich!
What we see of China’s economy – its high growth in GDP – is not what fueled its Infrastructure Development! Rather the infrastructure development when its economy was bad paved the way for today’s scenario! And, this infrastructure is ALWAYS built for the companies and the high end populace so they can bring in greater investments in buisiness and commerce. Poor do NOT invest into the economies. Rich do. They ensure that those who are poor today can find jobs and education and tomorrow can find a chance to have their own shot at the riches.
It is time we understood this principle of basic commerce clearly!
Featured Image: Wikicommons