India's cabinet has approved picking Japan to build a multibillion-dollar, high-speed railway, an Indian government official said Thursday.
The planned railway line, connecting the 500 kilometers between India's financial capital Mumbai and the western city of Ahmedabad, will cost about 980 billion rupees ($14.7 billion) and be financed by a low-interest loan from Japan, said the official who asked not to be named.
The decision was made at a cabinet meeting late Wednesday. The deal will likely be announced this weekend when Japanese Prime Minister Shinzo Abe travels to India to meet Prime Minister Narendra Modi.
Japan offered an attractive financing package on the railway project to win over Indian leaders. Japan has offered to finance the project with a 50-year loan at an interest rate as low as 0.1%, the official said. India won't have to start payment on the loan for 15 years, said another official familiar with the negotiations.
Japan couldn't confirm whether the final decision had been made, the details of the deal or when any decision would be announced but the country is looking forward to backing the project if picked, said one senior Japanese government official familiar with the negotiations on Wednesday.
"If the Japanese system is chosen, we would work hard to ensure its smooth implementation," said the official in Tokyo who asked not to be named.
Japan and India have been strengthening ties in the last 18 months as Asia's two largest democracies look to build a counterweight to China.
In October, warships and aircraft from the U.S., India and Japan practiced hunting enemy submarines together in exercises in the Bay of Bengal, signaling the their deepening relationships and rising concerns about China's growing military and economic influence in the region. China has been growing closer to many of India's neighbors by backing big infrastructure projects.
A huge deal in India would help make up for Japan's embarrassing losses in bids for high-speed rail contracts in Indonesia and Thailand to China. Japan's failure had alarmed officials in Tokyo, heightening concerns that China is eclipsing Japan as the main economic partner for key countries in Southeast Asia.
The high-speed corridor is a pet project of Mr. Modi, who is trying to modernize the Indian economy. Under the Japanese proposal, construction is expected to begin in 2017 and be completed in 2023.
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