From WSJ (5/13/98)
India Conducts Two More
Underground Nuclear Tests
By NEELESH MISRA
Associated Press
NEW DELHI, India -- India conducted two more
underground nuclear tests today, local news agencies
reported, just days after setting off three nuclear blasts that
outraged the world.
The news agencies, quoting an official announcement, said
the tests were held at the same desert range southwest of the
capital where the nuclear explosions were set off Monday.
India's first test, 24 years ago, was also conducted at the
range near Pokaran, 330 miles from New Delhi.
Few other details were immediately available.
White House officials had no comment on the reports, but
reiterated that President Clinton would address the subject
later Wednesday in Berlin befroe meeting with German
Chancellor Helmut Kohl. President Clinton is expected to
announce that the U.S. will impose economic sanctions on
India.
The economic ramifications of the
underground nuclear tests India
conducted, and did a second time,
were likely to be far-reaching in a
country whose economy has stalled
after years of rapid growth.
Business leaders, however, insist
they aren't worried. Confident that the lure of a huge,
untapped market in this country of nearly 1 billion people
would be stronger than the urge to take political action,
industry officials dismissed the impact of possible
sanctions.
U.S. companies "need us as much as we need them,"
Dewang Mehta, who heads the powerful National
Association of Software and Service Companies, was
quoted as saying by The Times of India newspaper.
Even so, private investment in India is minimal. The south
Asian country has also only recently opened up to foreign
investment, so such funds are considered to have only a
small impact on the economy.
Washington could deny loan guarantees that help encourage
U.S. businesses to undertake projects like building airports
and roads in India. U.S. aid and loans are also used by
Indian businesses who need capital to start joint projects
with American companies.
India's stock market failed to register much concern,
however. The Bombay Stock Exchange was off 1.3% today
from Tuesday's close.
"The market is betting on sanctions not being severe," said
U.R. Bhatt, fund manager at Jardine Fleming.
In Washington, officials are reviewing the Nuclear
Proliferation Prevention Act of 1994 to determine how
President Clinton can respond through sanctions and other
penalties.
Under the law, non-nuclear countries that detonate nuclear
devices are subject to denial of U.S. aid, loans and credit
guarantees. U.S. economic and humanitarian aid to India by
the U.S. Agency for International Development is currently
around $155 million.
Though other countries contribute far more in aid, India's
media focused on the United States.
"The administration sees India as a great potential
investment and trade partner, and would like to find a way
around mandated sanctions if possible," The Economic
Times, the country's largest business daily, said in an
editorial today.
Other countries have been quicker to respond. Germany's
minister for economic cooperation, Carl-Dieter Spranger,
called off aid talks with Indian officials scheduled to have
started Tuesday in Germany, putting a portion of new
development aid worth $532 million for India on hold. No
negotiations on further aid will be taking place -- at least for
the time being.
In addition, the Danish government announced that it had
frozen its $28 million in aid to India. Japan, India's largest
donor, said it was canceling about $30 million in aid. Since
1992, Japan has extended some $1 billion annually in official
aid to India, mostly in the form of loans.
Neighboring China, which said India's test hurt regional
peace and stability, could stop nuclear fuel sales to India's
four nuclear power reactors at Tarapur near Bombay.
Japanese Prime Minister Ryutaro Hashimoto has said he
plans to propose joint action against India during the
Birmingham summit this weekend with leaders of
industrialized countries.
The largest impact on India's economy could be in
withholding loans. Japan and the European Union, and the
United States account for about 70% of the voting rights in
the World Bank and International Monetary Fund. India's
World Bank loan package touched $3 billion in 1998.
The threat of coordinated international action comes at a
difficult time for India's economy. India enjoyed high
growth in the early 1990s after economic reforms were
launched.
Reforms have faltered recently. Growth was estimated at a
disappointing 5% for 1997-98, down from 7.5% in the
previous fiscal year, and industrial growth was estimated at
around 6 percent, compared to almost twice that the
previous year.
Pakistan, meanwhile, demanded that the United States and
other industrialized countries cut off aid to India. Pakistan
has been under U.S. sanctions since 1990, when the U.S.
administration cut off all military and humanitarian aid to
because it believed that Islamabad had a nuclear bomb.
Pakistan and India have fought three wars since 1947. |
