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Is Bullet Train a major Modi blunder?

Discussion in 'The Big Adda' started by Guynextdoor, Sep 14, 2017.

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Is Bullet Train Strategic Blunder?

  1. Yes

    8 vote(s)
    14.0%
  2. No

    49 vote(s)
    86.0%
  1. Paliwal Warrior

    Paliwal Warrior Lt. Colonel ELITE MEMBER

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    In India foreign currency loans are provided startung at libor + 2.5% for usd
     
  2. Paliwal Warrior

    Paliwal Warrior Lt. Colonel ELITE MEMBER

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    When the loan is given to a government or a country with sovereign backing the markup ( libor+) is very less compared to commercial loans rates
     
  3. Scotlander

    Scotlander Lieutenant FULL MEMBER

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    I posted Kejriwal & susodia's views on running Bullet Train from Mobile Phone.:lol:
     
  4. A_poster

    A_poster Captain FULL MEMBER

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    (a) Indian credit rating is BBB-. Even dollar denominated sovereign debt of India would have interest rate higher than LIBOR+2.11% (Rate for BBB rated securities). Usually, Government securities do not work on LIBOR+ principle. They have a fixed amount that is to be paid on maturity,and bidding is done for the price at which that security would be purchased. If India floats Dollar denominated sovereign debt (which it does not), mark down rates would be around 3.5% per annum.

    (b) Interest rate of international loans depend on credit ratings. A commercial loan given to a AAA company would carry lower interest rate than to a country with BBB- rating.

    Pakistan recently floated Eurobonds with 5 Year and 10 Year maturity, & they carried interest rate of 7.75% and 8.25% respectively;effectively LIBOR(1 Yr)+7.97% & LIBOR(1 Yr)+8.47%. (LIBOR rate for Euro are negative for all slabs. For 1 Yr, they are least negative at -0.22% http://www.global-rates.com/interest-rates/libor/european-euro/euro.aspx )

    Exxon Mobil is an AA rated company. Its bond yield is 2.709%.Its effective borrowing rate is LIBOR(1 Yr)+0.9336% ( http://www.global-rates.com/interest-rates/libor/american-dollar/american-dollar.aspx )

    (c) Loan given for bullet train does not carry sovereign guarantees. It is a commercial loan provided to National High Speed Rail Corporation, an SPV of Indian Railway formed to implement and oversee Bullet Train project.

    (d) Interest rate for Loan at 0.1% is already just 1/15th or 6.67% of rate of interest that Japanese themselves have to pay on their commercial loans (1.5%). It is also lower than inflation rate of Yen (0.5%) or Bank of Japan expect long term inflation rate at 1.1%. There is already a very big markdown from every perspective: Commercial rate in Yen,& inflation rate of Yen both present and postulated.
     
    Last edited: Sep 25, 2017
    PeegooFeng41 likes this.

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