India Distressed By Need For Imf Aid

July 01, 1991|By New York Times News Service

NEW DELHI, India -- Facing a grave economic crisis, the newly elected Indian government has begun urgent talks with the International Monetary Fund seeking emergency aid of several billion dollars.

Yet the conditions for such assistance are stirring anxiety in this nation, which historically prides itself on self-reliance.

At issue is not only the economy but also India's sensitivity to Western involvement. What makes the nation's plight especially delicate is the realization that, without bowing to Western conditions for economic change, India could slide into collapse.

The immediate issue is India's struggle to avoid defaulting on loans. It has never defaulted since independence 44 years ago. India's foreign debt has climbed to about $72 billion, making it the world's third-largest debtor after Brazil and Mexico.

In 1980, its foreign debt was $20.5 billion. At the moment, Western officials say, India has only $1.1 billion in its hard-currency reserves, enough for two weeks of imports.

Government officials and Western diplomats say that, to meet the emergency, India will seek anywhere from $5 billion to $7 billion from the IMF.

Officials said that it would be the biggest loan the IMF has ever made to India, and that it would hinge on a set of conditions demanding that India reduce its budget deficit, open its markets to foreign competition, diminish its maze of licensing requirements, cut subsidies and liberalize investment.

India, which still views itself as a socialist non-aligned leader, views the potential arrangement with pain, even embarrassment.

"We are very uneasy about conditions imposed on us," said Ashis Nandy, a political scientist at the Center for the Study of Developing Societies in New Delhi. "This will be seen as a kind of interference with India's autonomy."

The economic crisis came about because of an overlap of political and economic problems, including India's revolving-door governments in the last two years, with four prime ministers and four finance ministers, which led to virtual economic paralysis.

Other factors included the absence of a coherent budget in recent years, a spiraling deficit, rising inflation and India's panicky purchase of oil at $30 a barrel, about $10 higher than today's price, during the Persian Gulf war.

An $1.8 billion emergency loan from the IMF, approved in January, has already been depleted.

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