Now, Defuse

IN May 13, the day the US and Japan announced economic sanctions and aid freeze in reaction to the Indian nuclear tests, it was business as usual in India. Cola giants Coke and Pepsi were locked in a court battle on employee-poaching. Southern Electric Utilities, the largest power company in the US, was meeting central government bureaucrats to propose a 1,000-MW project in Orissa. In the US, Motorola announced a $3.5-million investment in a world-class design centre in Gurgaon outside Delhi. On receiving the news of the sweeping sanctions, which also implied that billions of dollars in aid from the World Bank, India’s largest patron, might be threatened, New Delhi arched its eyebrows just a little.

Even as protests and aid cutoff threats are pouring in from other nations, the corridors of the government are cool. US National Security Advisor Sandy Berger told reporters "it was a fairly expensive decision for India", but India declared that economic sanctions announced so far would not have any far-reaching impact, at least nothing that cannot be tackled. The budget is being tailored to factor in the financial flows that may dry up, core sector projects are being cleared fast, fears of a run on the rupee have been ignored. Indian industry has shrugged off any long-term impact of the sanctions. Said CII president Rajesh Shah: "The normal course of business, foreign investment, trade and economic ties would continue as before." Added Amit Mitra, FICCI secretary-general: "Sanctions do not achieve anything. Anyway, those imposed by the US are only soft sanctions."