Tough talk needs tough action. In the last six weeks, the Vajpayee government has done precious little apart from whistling in the dark to counter the freezing of bilateral and multilateral aid and the imposition of US sanctions. It is one thing to try to keep up business morale by playing down the impact. It is quite another to act as if nothing has changed and to throw away one opportunity after another to anticipate the effects of sanctions and minimise them. There is undoubtedly a high degree of bombast in Washington's threat to impose fullscope sanctions which will hurt India and Pakistan and remain in force for a long time. Such sanctions will hurt US business interests as well as the conduct of its foreign policy. Madeleine Albright describes US sanctions legisation is a blunt instrument.It is more like a double-edged weapon. So, there is bound to be flexibility in applying sanctions as a result of domestic commercial pressures and foreign policy objectives. None of this, nor any amount of railingagainst US hypocrisy, muscle-flexing and subversion of multilateral financial institutions takes the Vajpayee government off the hook. A wide range of bold and imaginative steps are needed to limit the damage to the economy because of aid and credit cut-offs. There is a hint of retaliatory measures in Prime Minister Vajpayee's first interview to an American newspaper. Quite what he has in mind is hard to say but it cannot surely be more Pepsi- and Coke-bashing by the Swadeshi Jagran Manch bunch. There is one commercially acceptable way to hit back and do Yeshwant Sinha and the MEA a favour at the same time. Why not sell the best Punjab wheat to Pakistan and undercut the US deal for two million tonnes which has just received a waiver from the US Congress? Pakistan and India can both make gains. Pakistan saves dollars by selling India power in exchange, Sinha gets to recoup a part of his subsidies and the MEA can hope to get talks started. Worth a try?The starting point for minimising the impact of sanctionsis to give up the pretence that there will be no impact. The power sector provides an indication of just how sanctions will play out. Centre and state power plans look like being the worst hit by the denial of multilateral loans and US credits. Alternative sources of funds may be available but external commercial borrowing will be more expensive because of high risk premia. At least 4 out of 10 private sector projects involving 15,000 MW of additional power have US promoters or contractors. They are likely either to be abandoned or delayed. States like Andhra Pradesh and Haryana which have taken political risks by reforming their policies will receive a nasty setback. Although the Centre anticipated such troubles, its major initiative by way of the Power Bill fizzled out ignominiously. The government cannot afford to talk tough and retreat. Or any more fiascos like the Budget.Sanctions demand well-developed counter-strategies. Is it the government's intention to transfer resources from the social sector tothe infrastructure and let foreign humanitarian aid to look after health and education?
