* First dose of Modi's "bitter medicine" to revive economy
* Passenger fares, among world's cheapest, to rise 14.2 pct
* Gov't expected to open railways to foreign investment
(Adds minister quote, analyst comment)
By Tommy Wilkes
NEW DELHI, June 20 India's new government on
Friday pushed through a steep hike in rail passenger and freight
fares, the first dose of the "bitter medicine" Prime Minister
Narendra Modi has warned is needed to revive the economy.
India's railway network is one of the world's largest, but
years of low investment and populist policies to subsidise fares
at affordable levels have crimped growth in new lines and
hindered private investment.
From June 25, rail passenger fares will increase by 14.2
percent and freight rates by 6.5 percent, the railways ministry
said in a statement. The last fare hike was in October 2013.
"To meet all the necessary expenditure, I was forced to
implement the order," Railway Minister Sadananda Gowda told
reporters after announcing the increase.
Indian trains are among the world's cheapest. A ticket on an
overnight sleeper train running the roughly 1,400 kilometres
between New Delhi and the eastern city of Kolkata, for example,
can cost as little as 520 rupees ($8.65).
Many Indians see the railways, which transport an estimated
25 million people each day, as a service for the "common man".
Many riders are poorer Indians who have missed out on the fruits
of two decades of surging growth that enabled millions of their
compatriots to buy cars or travel by air for the first time.
The previous government deferred a plan to increase fares in
May, leaving the decision to Modi's new administration.
Modi prepared the ground last weekend in comments to workers
of his Hindu nationalist Bharatiya Janata Party. He asked them
to back the steps he planned to restore the health of Asia's
third-largest economy, which has suffered its longest slowdown
since the country embarked on free market reforms in 1991.
Analysts at Nomura said the increase in passenger fares
would raise consumer price inflation by around 10 basis points,
while the freight hike would impact wholesale price inflation -
which hit a five-month high in May - because the cost of
transporting key goods like steel would rise.
The government is also expected to open up parts of the rail
network to foreign investors, which some officials say is
necessary to modernise one of the country's last great
India's government will present its budget by mid-July.
($1 = 60.1150 Indian Rupees)
(Reporting by Tommy Wilkes; Writing by Rajesh Kumar Singh;
Editing by Clarence Fernandez and Tom Heneghan)