'Curbs No Serious Threat To Economy' Will Attract External Funds'

The sanctions imposed by the United States and others are unlikely to have any serious impact on India's economic development. On the contrary, theyhave brightened the prospects of India attracting more external funds for social infrastrucutre like sanitation, health and education.

This was among the many conclusions reached by a study on Sanctions- Indo-US Perspectives, conducted by the Asian Institute of Transport Development (AITD) and brought out as part of its Economic Issues monogram series. The study, one of the first to be compiled by a research body in the wake of India's nuclear explosions, says the sanctions will in any case have no major impact on India within the next couple of years because of their limited scope. "Within that time, it is reasonable to expect that there would be considerable dilution in the nature and content of these sanctions," the study says.

The study further points out that the sanctions are so far restricted to assistance for government projects and projects involving exporters assisted by the US Exim Bank. "As corresponding institutions in other countries have not withdrawn from their Indian operations, the infrastructure investors can always turn to these countries instead of the US," it says. It argues that some US firms have already indicated they would be able to compete in India even without US Exim Bank facilities. For instance Boeing had initially relied on Exim Bank aid to sell aircraft to Air India and Jet Airways but has now announced it would do so without such help.

The study notes that the sanctions may not affect infrastructure investments, but they would cause cost and time overruns. "Continuation of external investment in infrastructure projects in India is more likely to be affected by the foreign investors' assessment of the Indian economy and the capacity of Indian managerial talent to implement mega projects rather than, by the US-imposed sanctions," itic management and lack of reforms. On what reforms need to be pursued, the study underlines the need for switching the government's consumption expenditure in favour of investment expenditure, simpliification of the interest rate regime, realistic management of the exchange rate and reduction in the fiscal deficit.