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The government is considering resuming large-scale economic aid to India as early as this summer, nearly two years after New Delhi’s nuclear tests prompted Japan to suspend assistance, government sources said Thursday.

The move comes amid growing pressure from within the ruling Liberal Democratic Party to completely lift economic sanctions against India to repair soured bilateral relations.

The sources said the government is specifically considering extending fresh yen loans for a subway project in New Delhi and a power project in the southeastern province of Andhra Pradesh.

The new low-interest yen loans would be extended to help finance the second phase of the two projects. The total amount of assistance could reach nearly 70 billion yen, the sources said.

In fiscal 1996, which ended in March 1997, Japan provided a total of 34.5 billion yen in yen loans for the first phase of the two projects — 14.7 billion yen for the New Delhi subway project and 19.8 billion yen for the Simhadri thermal power project in Andhra Pradesh.

Some government officials argue, however, that it is still too early to resume large-scale economic aid to India.

Japan has retained its status as the world’s largest single aid donor for the past nine consecutive years. Before the economic sanctions were imposed, Japan was also by far the biggest single aid donor for India.

But since the international outcry sparked by India’s nuclear tests in May 1998, Japan has suspended official development assistance to the world’s most populous democracy, with the exception of minimal grants-in-aid for humanitarian purposes.

Japanese ODA extended bilaterally to developing countries consists of low-interest yen loans, grants-in-aid and technical cooperation.

India’s neighbor Pakistan conducted nuclear tests in response to those carried out by India, raising deep international concerns about the escalation of a nuclear arms race and a possible nuclear war in South Asia.

Japan, the world’s only nation to suffer atomic bombings, has harshly criticized India’s nuclear tests and pressed New Delhi to join the 1996 Comprehensive Test Ban Treaty as soon as possible. Although India has repeatedly indicated a possibility of joining the CTBT, it has so far failed to do so.

While Japan has made India’s signing of the CTBT a condition for completely lifting economic sanctions, the new yen loans for the subway and power projects represent a continuation of previously commenced aid projects.

The government’s position since the Indian nuclear tests has been to suspend financing of any new projects while considering additional yen loans for projects already commenced with Japanese financial assistance on a case-by-case basis.

The LDP decided at a meeting of party panels on foreign policy affairs last week to urge the government to lift economic sanctions against India.

After the meeting, LDP lawmakers, including Taro Nakayama, former foreign minister and chairman of the LDP’s foreign-policy research council, told reporters that sanctions have severely damaged relations between the two countries.

The lawmakers said Japan’s antinuclear stance has been acknowledged by India and that maintaining sanctions is no longer necessary.