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India to spend $11B on railway investments

Grant Faint | Photolibrary | Getty Images

India plans to spend 654.5 billion rupees ($10.95 billion) on its railways in 2014/2015, the government said in its railway budget on Tuesday.

The government also expects total investment in railways through public-private partnerships to total 60.05 billion rupees in the current financial year that ends in March 2015.

In his maiden budget, the country's railways minister Sadananda Gowda said his ministry would also seek cabinet approval for allowing foreign direct investment in the state-owned network, but passenger services would be excluded.

"The bulk of our future projects will be... by the PPP model," he told India's parliament, referring to public-private partnerships.

India's railway, the world's fourth-largest, has suffered from years of low investment and populist policies to subsidise fares. This has turned a once-mighty system into a slow and congested network that crimps economic growth.

The decision to push private investment signals the appetite Prime Minister Narendra Modi's new government has for taking tough and unpopular decisions he has said are needed to revive the economy.

Reform of the railways has long proven politically sensitive. Successive governments have backed away from modernization, preferring instead to use the system to provide cheap transport for voters, and jobs for 1.3 million people.