NEW DELHI: The Demolition of all the three domes at the Babri Masjid complex at Ayodhya on Dec.6 may have serious implications for the Indian economy. The major areas of concern would be oil supplies from the Gulf countries international credit rating and the world business leader’s confidence in the country.
A lot however will depend on how the Center tackles the situation The key areas which would be kept under watch by international kept under watch by international credit rating agencies foreign investors and the Gulf countries would be how the Central government contains any political disturbances that might arise following the Demolition the degree of firmness with which it tackles the situation and the political strength of the government to cope with the current problem.
Inquiries with foreign bankers and experts on the Indian economy revel the first reaction to the demolition of the Babri Masjid domes could be from many of the Gulf countries which in protest against the respect shown to a Muslim religious structure could consider canceling supplies of crude oil and petroleum products to India. This may not cause any immediate dislocating in the country’s petroleum sector but could affect domestic availability in the long run if this feeling persists for some time.
To international credit rating agencies which had recently removed India from Credit watch (which indicates that the country’s credit worthiness is not stable and needs to be monitored for some time) may even review their stand.
These agencies firmly believe that political stability plays a key role in helping the government maintain its balance of payments and keep fiscal situation under control They also feel that the continuing Ayodhya dispute is a sign of government weakness.
For instance Moody’s in its last years report on India had noted that “domestic politics had its main impact on the balance of payments during V.P.Singhs short rule as prime minister his government’s authority was also diminished by its inability to avert violent conflicts between militant Hindus and the defenders of Indias non secular political traditions.” At another point in the report Moodys had noted that “foreign investors would want to assess the outlook for political stability before making large investments in India.”
The biggest sufferer could be India’s image in the international business community as a stable political economy.
In the last one year assiduous image-building efforts by the Indian government in international for a have helped in convincing foreign investors that there was nothing back on the reforms program already introduced In a result international business has begun taking India a little more seriously.
The World Economic Forum meeting on India held here recently showed that the participation from leading foreign companies was at a fairly senior level. A number of large foreign companies have also begun eyeing India with a view to investing here.
But the demolition of the Babri Masjid domes may once again make these companies wary of investing in a country which may well witness political disturbances.
If the industrial climate in Uttar Pradesh the largest in the country also suffers foreign investors and international credit rating agencies might be forced to take a fresh look at India say these experts.
Article extracted from this publication >> December 18, 1992
