INDIA SEES SHORT-TERM DAMAGE FROM SANCTIONS \ ANALYSTS: TRADE NEEDS WILL OVERCOME OUTRAGE

INDIA SEES SHORT-TERM DAMAGE FROM SANCTIONS \ ANALYSTS: TRADE NEEDS WILL OVERCOME OUTRAGE

India's defiant testing of five nuclear devices, and the subsequent Western sanctions, could hurt trade in the short-term, analysts said.

But the coalition led by the Bharatiya Janata Party could minimize the damage to India's economic growth if it pursues reforms vigorously, they said.The Indian economists interviewed took the approach that the United States needs India more than India needs the United States.

''U.S. business will be hit (by the sanctions) more than us,'' said Pramod Mahajan, political adviser to Prime Minister Atal Behari Vajpayee.

President Clinton announced Wednesday he is imposing economic sanctions on India under a 1994 U.S. non-proliferation law. The sanctions cut off all bilateral aid and loans by U.S. banks. The Commerce Department also has put a hold on pending export licenses. The law also requires the United States to oppose loans by international lending agencies. Japan, Denmark and Sweden also plan to cut or suspend assistance. But Britain and France, while opposing the tests, said they would not impose any sanctions.

LOOKING FOR DIVISION

The government hopes to brave the sanctions by banking on the division among Western powers. It is confident that even the United States cannot ignore India's trade and investment potential for long.

Commerce Ministry officials also hinted that if the United States doesn't remove the sanctions, then India might respond by raising tariffs for U.S. exports. The United States is the largest investor in India. U.S. companies are active in power, telecommunications, petroleum, food processing, electrical equipment and services. The stock of U.S. foreign direct investment in India in 1996 was $1.1 billion, an increase of 35.9 percent over 1995. U.S. direct investment in India is concentrated largely in the banking, manufacturing and financial service sectors, but a substantial portion of new investment approvals are in infrastructure sectors.

Analysts said if European nations like Britain and France do not impose sanctions, U.S. sanctions will put American companies at a disadvantage.

''The primary loser will be the U.S. industry,'' said G. Balachandran, an economic analyst.

Any damage to American investment will also affect U.S. exports.

LENDING FREEZE COULD HURT

A freeze on lending by the U.S. Export-Import Bank would be a major blow to Indian companies importing U.S. equipment, sources said.

The impact on merchandise bilateral trade will depend on the scope and extent of American sanctions, the analysts added. India-U.S. bilateral trade crossed the $10 billion mark in 1997, with the balance of trade in India's favor. U.S. merchandise exports to India were $3.6 billion, an increase of $298 million (9 percent) from the level of exports in 1996. U.S. imports from India were $7.3 billion in 1997, an increase of $1.2 billion (18.7 percent) from the level of imports in 1996.

TRADE IN MANY PRODUCTS

Principal U.S. exports to India were aircraft and aircraft parts, computers and components, organic chemicals, fertilizer, gas turbines, industrial machinery, integrated circuits, telephonic and telegraphic parts and equipment.

Main imports by the United States were textiles, apparel, diamonds and jewelry.

''Trade volumes may be affected for the first few months, but they won't last long,'' said S.R. Bharucha, chief economic adviser at the Associated Chambers of Commerce and Industry (Assocham).

Mr. Bharucha said while governments can set up obstacles, trade is decided by traders themselves. ''If there is need for trade, then it will take place,'' he said.

Indian apparel exporters also were unconcerned. ''There will be no significant impact on the industry,'' said K.L. Magu, president of the Garment Exporters Association. ''The United States and other Western countries buy Indian apparel because they are globally competitive.''

Mr. Magu said European countries may withdraw concessions under the system of preferences. These benefits normally total a recovery of 14 percent customs tariff by exporters.