Path: utzoo!utgpu!news-server.csri.toronto.edu!bonnie.concordia.ca!uunet!seismo!dimacs.rutgers.edu!aramis.rutgers.edu!remus.rutgers.edu!gaddam From: gaddam@remus.rutgers.edu (Surekha Reddy Gaddam) Newsgroups: misc.news.southasia Subject: India News Message-ID: Date: 16 Jun 91 12:20:57 GMT Organization: Rutgers Univ., New Brunswick, N.J. Lines: 62 Approved: gaddam@remus.rutgers.edu Path: athena.mit.edu!sreddy From: sreddy@athena.mit.edu (Suresh Reddy) Approved: gaddam@remus.rutgers.edu Punjab ------ BBC (Chandan Mitra of "The Sunday Observer" of Delhi did most of the talking.) In Ludhiana dist., there were terrorist attacks on two trains. They occurred 15 minutes of each other. Gunmen fired indiscriminately on passengers. At least a hundred are dead. This is part of a systematic campaign by the ultra-extremists to get elections canceled. There were assassination attempts on the home minister, Sahay who is contesting from Punjab and the Doordarshan director, earlier. Several election candidates have been killed causing cancellation of elections for 1/4th of the Punjab assembly seats. With this outrage, the elections scheduled next week may not be held at all. Congress and a Communist party are already boycotting the elections. Elections --------- BBC Parliament with Congress emerging as the largest parliamentary party. BJP is expected to finish second. Alliance between Congress and Communists or a faction of Janata Dal is expected. Financial crisis ---------------- The Economist India's credit rating has been downgraded several times recently, warning banks not to lend until the country agrees on a reform package with the IMF. India hopes this will bring $2 bn by Sept. and a further $5 bn over three years, under IMF's enhanced structural adjustment facility. Foreign debt, $21 bn a decade ago, is now $71 bn. For long, this wasn't a worry to bankers since much of it came from aid. Even today, only 1/5th is owed to commercial banks. Of this $14 bn, $5.5 bn is short term. $2.5 bn oF India's bonds are in circulation abroad. India also holds around $12 bn of foreign exchange deposits, from non-resident citizens, who get a special interest-rate premium. But these deposits have virtually stagnated since last August. Foreign exchange reserves were down to $1.2 bn in April, barely three weeks of imports. An IMF loan of $1.8 bn in Jan. staved off a disaster when the reserves were down to $1 bn. Now, the govt. is selling gold abroad. Until the Gulf crisis, India had been cutting its debt-service ratio, from 31.6% of exports in 86-87 to 26.3% in 89-90. Exports were rising at 25% a year. But imports also rose as fast or faster, fueled by fiscal profligacy. The IMF and the World Bank feel fiscal discipline is the main remedy. But they also want reforms in industry (fewer controls, encouragement of foreign investment), in trade (lower tariffs, fewer non-tariff controls), and in finance (cleansing bank balance sheets of huge dud loans, lowering the 55% of bank loans that go to govt. at concessional rates, insulating state-owned banks from political and bureaucratic arm-twisting). The soon-to be elected govt. will have little choice but to accept this. If so, the commercial banks will resume lending: India's debt-service ratio is slight compared with Mexico's 55% plus or Brazil's 80% in the early 80s. ---------------------------------------------------------------------------- END OF ARTICLE