POLITICS-INDIA: Sanctions Seen As Blessing In Disguise

By IPS Correspondents Reprint | | Print |

Dev Raj

NEW DELHI, May 17 1998 (IPS) - International sanctions slapped on India for last week’s nuclear tests will not stop its scientific programmes in strategic areas and may actually hurt United States’ business interests in this country.

Sanctions under various technology transfer regimes have only spurred India into indigenous development in such areas as cryogenic engines for missiles, atomic energy, satellites and super computers, said Abdul Kalam the scientist behind the blasts, announced Sunday.

The ultra-nationalist, right-wing, Bharatiya Janata Party (BJP)-led government, which apparently ordered the tests within three weeks of coming to power, sees the new Washington-led economic sanctions as something of a blessing in disguise.’

“AIDS came to India along with aid,” India’s minister for science and technology, Murli Manohar Joshi declared recently, while launching a new indigenously developed kit for mass testing of HIV.

Though Joshi was roundly condemned by newspaper editorials for his ‘insensitive’ attitude towards rapidly spreading HIV, it revealed his government’s disdainful attitude to foreign assistance.

The BJP is committed to the ideal of ‘swadeshi,’ or self- reliance which essentially demands protection for local industry against foreign competition. Indian business has roundly supported the tests even if they have had a depressing effect on the stock market.

Sanctions could actually have the effect of a return to the bad old days before liberalisation with all its high duties on imported consumer goods such as electronic items and non- essentials in the automobile sector.

Following the recent economic crisis which hit the ‘Asian Tigers,’ which left India largely unaffected, much praise has accrued to this country for its economic insularity.

Foreign aid accounts for only two per cent of the Indian government’s own investment in projects and so far only the Japan and Germany have followed the U.S in imposing sanctions on bilateral lending.

If the World Bank (WB) and the International Monetary Fund (IMF) are drawn into multi-lateral sanctions, which account for 70 per cent of India’s foreign loans, it could seriously hit infrastructural development but not areas like health and agriculture.

Currently, New Delhi is negotiating loans from the WB, the AsDB and the Japanese Overseas Economic Cooperation Fund (OECF) worth USD 4.3 billion.

But estimates show that only 16 per cent of multilateral loans actually get to the people they are intended to help with the rest going to western consultancy firms, salaries and debt servicing says Devendra Sharma, well-known agricultural expert.

According to Sharma, many WB-IMF projects are not only drawn up with multi-nationals in mind but are outright frauds. He cited the certified seeds project as one example.

“Traditional wheat and rice seeds are as good as the imported certified seeds which in addition are expensive and unaffordable to ordinary farmers,” he said.

Health expert and convenor of the Independent Commission on Health in India (ICHI), Alok Mukhopadhyay said the USD 600 million or so spent on India was well-known for its wrong priorities which again benefited western suppliers of equipment.

If the WB stopped funding health projects in India, it might actually give authorities here a chance to pause and reorient the country’s real health priorities, Mukhopadhyay said.

Many large WB funded projects in India have come under fire in India for being environmentally unsound or trampling over the rights of local people – the most notable of these is a 2,000 megawatt coal-fired power project at Singrauli which is to receive a total 1.2 billion dollars in three tranches.

But what could rally make economic and trade sanctions against India is the fact that businessmen from the United States who are keen on doing business here may actually get hurt if full-scale sanctions are imposed.

The Boeing aircraft company, for example could end up losing a contract for 737 aircraft because USD 200 million was supposed to come from the U.S Exim Bank. European companies such as Airbus Industrie could be the gainers should the deal fall through.

India is one of the biggest markets for aircraft and could spend over USD 15 billion over the next 20 years because its population is still comparatively poorly served by jet transport.

British and French disinclination to impose sanctions on India could stem from competition for the aircraft deal which could just as easily be financed by the European Credit Agency giving Airbus an advantage.

Another casualty could be the power company Enron which is setting up USD 2.5 billion power plant in the western state of Maharashtra, the financing for which is supposed to come partly from the U.S Exim Bank.

India is also a major market for power projects and a top BJP functionary recently warned “Tokyo, Bonn and Washington may be losing out to other players in ASEAN, Paris and London in bagging lucrative contracts.”