NEW DELHI: The battered Indian economy is in for a telling blow after the war in the gulf.
The calculations of the planners who are striving to correct the fiscal situation would go away. Fond hopes to bring down the deficit from the present 86% of the gross domestic product to three to four per cent in the next three years will remain on paper.
A conflict in the gulf would escalate oil prices to levels unforeseeable stretching beyond limits the already strenuous balance of payments situation.
The implications of the war on the country’s none too good.
Reports say exports to the gulf have come to a virtual halt with the United Arab Emirates Bahrain Oman and Saudi Arabia are reluctant to finance imports. Indian banks too are stated to be shy of offering negotiable instruments for exports to west Asia.
Fully wary of the consequences of a war the country is already finalising a contingency plan for the economy in the event of a war. The ministries of finance petroleum shipping and food in conjunction with the foreign office are bracing up to meet any eventuality.
The contingency plan is likely to include hard measures to conserve petroleum products in the core sectors of the economy like agriculture industry transport and aviation.
While at present government is not contemplating petrol rationing it might clamp another 10% cut in the supply of petroleum products notably petrol and diesel at the retail level over the existing 15% cut.
Even as war clouds loom large over the gulf horizon the impending event has led to panic buying of petrol in the capital and elsewhere in the country.
But petroleum ministry officials maintained that there was no rationale behind the panic. All oil companies have adequate stocks they claimed. They said government has made adequate arrangement for stocking petrol diesel and other products.
Official circles also feel that with a good crop in the last three years and a comfortable stock of food-grains there would be no problem in ensuring smooth supply of essential commodities.
The government has already announced its intention to import edible oil which is in short supply.
The foreign ministry along with the petroleum ministry has taken major initiatives to tie up oil supplies anticipating shortages in the event of a war.
Efforts have been continuing to ensure that inventories are full and supply of at-least four million tonnes is built up before: February which would last for 45 days. India has already struck a deal with Iran for one million tonnes of oil on credit and is also tying up supplies with Malaysia. Negotiations are continuing with South American nations particularly Venezuela.
Article extracted from this publication >> January 25, 1991
