Implications of Economic Sanctions on India
30 May, 1998 · 102
T. C. A. Srinivasa Raghavan analyses the impact of sanctions on India's economic and fiscal health is analysed by T. C. A. Srinavasa-Raghavan.
Some people think that
What about the figure of 21.4 billion dollars published by the
However, the story could be different in the long run if the controversies that have arisen following the nuclear tests and the imposition of the sanctions are not quickly resolved. But it is hard to predict the precise form in which these costs will arise.
If all goes well, they may not arise at all. But if things do go wrong, the higher costs would arise from the heightened commercial risk perceptions about
A second way in which
Meanwhile, the World Bank has postponed consideration of fresh loans totalling $865 million and the European Union has fallen in line by warning that it will act for postponement of multilateral assistance and withdrawal of trade privileges if
To compound the above hiccups, Standard and Poor's have also further downgraded
The fact is that the fiscal deficit, at 6.5 per cent of GDP, is too high for comfort. And, though the RBI thinks that the current account deficit will be contained at 1.5 per cent, It fails to say that can be achieved only with lower GDP growth. The alternative assumes higher capital inflows. But that is unlikely. If anything, inflows will be lower this year. The only option, therefore, is a sharp increase in the export growth rate which, given the East Asian currency devaluations, may not happen.
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