Major donor nations may lift sanctions against India

By Alok Mukherjee

NEW DELHI, MAY 20.In a major development indicating the lifting of economic sanctions against India, the twice-postponed meeting of the India Development Forum (IDF) is being held in Paris from May 23.

The IDF is the new form of the Aid India Consortium, where lending agencies such as the World Bank and the Asian Development Bank and individual donor countries like Japan, and Germany, decide on their annual assistance to India.

The last meeting of the IDF was scheduled for end-June 1998 in Tokyo but was put off after the Pokhran nuclear tests in May. Since then, the annual meeting has not been held as most of the donor countries had imposed sanctions on India.

This year, in a quiet move, the meeting has been scheduled in Paris and the Indian delegation will be led by the Secretary, Economic Affairs in the Finance Ministry, Mr E. A. S. Sarma. Besides the World Bank and the International Monetary Fund, which organise the meeting, all the principal donor countries, including Japan and Germany will attend the meeting. While the World Bank has as recently as end-April this year, sanctioned fresh assistance for projects in India, resumption of bilateral assistance and fresh World Bank proposals would help India better manage its balance of payments position. In the last two years, India managed to do without external assistance as the loans committed prior to 1998 were still flowing in. However, in the absence of fresh approvals, the situation could have become difficult since India has a heavy repayment commitment on the past loans. The fresh assistance is used to a large extent to repay previous loans.

During the Paris meeting, the Indian delegation will provide a status report on the Indian economy. The main points which would be highlighted would be the fact that the Indian economy was poised for a high growth rate, that the internal and external economy had been managed well in the past three years and that despite the phenomenal increase in international oil prices, India's foreign exchange reserves are comfortable and the current account deficit is at a sustainable level.

Consequently, the Indian side will make out the case that in the present scenario, the Government needs an indication on the likely flow of external assistance into the economy for proper planning. The fact that India's disbursement rate for external assistance is high and that its project profiles are well designed are expected to make it easy for the donor countries to make their commitments for the current financial year.

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