The historic deal, which will see Japanese “bullet” trains plying a new route between Mumbai and Ahmedabad, was announced 12 December at the conclusion of a visit to India by Japan’s Prime Minister Shinzo Abe.
It will launch a “revolution in Indian railways”, India’s Prime Minister Narendra Modi said of the agreement, which is being seen as a coming together of India and Japan to counter-balance China.
“We greatly appreciate Prime Minister Abe’s extraordinary package of approximately 12 billion U.S. dollars and technical assistance, on very easy terms, for this project,” Modi said in a speech.
“This enterprise will launch a revolution in Indian railways and speed up India’s journey into the future,” he added. “It will become an engine of economic transformation in India.”
During Abe’s visit the two nations also announced a plan for civil nuclear and defence cooperation.
The deal to build a high-speed train line between the financial hub of Mumbai and Ahmedabad, approximately 505km north along the Indian Ocean coast, gives Japan a lead over China, which also wants to bring high-speed trains to India’s dilapidated rail network.
In September last year Chinese President Xi Jinping visited India offering up to $300bn in financing for rail and other infrastructure.
But relations between Asia’s second and third largest economies have grown stronger amid China’s rise as the dominant Asian power and tensions in the South China Sea. Abe and Modi are reported to have a personal friendship.
For the rail deal Japan offered a loan at an interest rate of just 0.1% with repayment over 50 years and a moratorium for 15 years, Indian Foreign Secretary S. Jaishankar told reporters.
India will be buying a Japanese high-speed train system, effectively with an export credit of $12bn.
Construction of the railway, which is estimated to cost $14.6bn, will begin in 2017, with the aim of starting operations in 2023, reported Japan Times.