Aug 20, 1999|
India invites the ire of G-8 nations
The Government's (read BJP) obsession for turning India into a nuclear power is proving to be an expensive proposition. Despite being aware of the adverse consequences of such a move, the government has gone ahead with a proposal to build up a nuclear arsenal. The Group of 8 nations (G - 8) has, in an expected move, suspended all loans for non-essential purposes ('non-basic human needs') to India.
This move could have a detrimental impact on the yet nascent economic recovery. Projects, involving large amounts of capital expenditure, usually source a part of their funds from international financial institutions. Such loans would now be suspended, jeopardising the fate of various projects. A case in point is the Enron Power project, which suffered a massive setback when similar sanctions were imposed on India in May 1998, after India conducted the nuclear tests. Enron was to source a part of its funds from the US Exim Bank, which came within the ambit of the sanctions.
Similar situations will occur as a result of the current sanctions, which will affect the investment activity in the economy. As the recovery in economic activity is also dependent on the level of investment activity, this move could have serious repercussions for India.
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