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May 14, 1998


Swraj Paul promises NRI support to finance ministry

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Lord Swraj Paul today met finance ministry officials in Delhi and assured them of the total support of non-resident Indians who contributed as much as US $ 11 billion to the country's foreign exchange kitty last year.

Reserve Bank of India sources feel that against this background of nationalistic euphoria, NRIs are expected to bring in about $ 15 billion in fiscal 1998-99, giving the government enough cushion to ride the storm of sanctions.

Confident signals today emerged from the Indian economy which appears to have withstood the pressure of trade sanctions. The stock markets bounced back and the government was keeping a close watch on the foreign exchange market.

The country's premium stock index recovered by an impressive 115 points, supported mainly by the government-owned Unit Trust of India. Significantly, even foreign institutional investors were seen lending sizeable support and appeared undaunted by the imposition of sanctions on India.

The rupee, however, came under some pressure and crossed the 40 mark before closing at 40.50/51, it even touched a low of Rs 40.80. The six month forward premium also looked up and closed at 9.08 per cent.

But with the finance ministry maintaining contact with prominent NRIs and the fundamentals of the economy well in place, RBI officials do not foresee any run on the rupee. A slight pressure on the Indian currency has not troubled central bank officials who said that India is not like the Southeast Asian economies.

According to finance ministry officials, the government is also watching whether industrialised nations and Russia will act in concert and impose economic sanctions as a retaliation to India's nuclear tests. The crucial G-8 meeting is beginning at Birmingham, United Kingdom, tomorrow and the issue of economic sanctions against India is likely to be taken up there.

Analysts say the government is making all-out efforts to ensure that the effects of trade sanctions do not spill over to foreign direct investment and even portfolio investments by the foreign institutional investors.

This became clear with the prime minister's office directing all ministries and departments to speedily clear major projects in the infrastructure sector, including telecommunications, power, petroleum and natural gas.

Power Minister P R Kumaramangalam also ensured foreign investors that pending clearances in regard to the fast-track projects would be issued shortly. He also clarified that the United States trade sanctions, which involve cutting bank loans, would not come in the way of the major projects. He said the total coverage of the multilateral funding in the power sector is only 20 per cent.

Senior executives from three power companies in Australia, China and the US discussed the progress of their ambitious projects even after the nuclear tests, showing well that FDI inflow would not be influenced by the trade sanctions.

Moreover, the next meeting of the Indo-American joint business council, to be held in Washington, will provide an excellent forum for the government and industry to put its point of view before multinational companies which are believed to wield tremendous clout in Washington.

For the Indo-US Joint Business Council, it is business as usual and undaunted by the trade sanctions and its effects, will meet in Washington in June to thrash out the issues hampering growth of trade between the two nations.


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