Your last post about the Oil and Dollar tango and the nuclear deal can be connected with dots – if you consider an important hidden element.

Geo-politics and war.

Add that to the mix-up and suddenly a new picture emerges.

Also – a primary difference between NRI’s and Indians at that time was the easy access to dollars that NRI’s had vs. Indians (I am ignoring your sarcasm). The root cause of the 1991 crisis was the unavailability of foreign exchange reserves that forced India’s hands and allowed the IMF to force their way in.

The BJP government, shortly after the sanctions had become impotent, became a “depositor” to the IMF.

Although the amount was puny (100 million or so) it sent a signal to investors that India will no longer play host to the moral hazard that the IMF propagates.

http://wwics.si.edu/topics/pubs/asia_rpt_120rev.pdf

Is it ignorance or bias that prevents you from acknowledging policies that were enacted by the BJP government that are aligned with many of your ideas?

It is fine if you disagreed with some specifics – but at least acknowledge that a strategic relationship was formed.

The red carpet was rolled out for Khatami on January 26, 2003. Beyond the symbolism, specific policies and goals for a long term partnership were set in place.

The Congress government did little or almost nothing to carry that forward, cowing down to American pressure.

The least you could have done was to acknowledge that Manubhai reversed some of the most critical steps that were initiated by the BJP…

Parallax my friend :-) Adjust your perspective.

There are several problems with your thesis. (BTW you have strayed from the main theme of the discussion – which was the financial impact of the 123 Agreement and the Hyde Act).

Citibank had nothing to do with the 1998 RIB’s. These were only issued by the SBI.

The 1991 IMF bailout package and the subsequent “reforms” were all done with India’s hands tied to the back and a gun to the head. The funds raised from the RIB’s in 1998 pre-empted an identical situation from developing.

After May 1998, once the expected sanctions were in place, the “capital markets” lowered India’s credit rating. Whether or not you agree with these “markets”, it meant a much higher rate of interest to raise dollars. The trade deficit could have easily spiraled India into a 1991 situation – which was the intent of the sanctions.

The “higher” rate of interest that the RIB’s offered as compared to the FCNR accounts was at least a 100 basis points *lower* than any other form of debt the Indian government could have raised.

Therefore the question to ask is why were NRI’s willing to get *less* interest than what the “markets” had determined?

The answer lies in an asymmetric perception of risk. As NRI’s and some Indians (who double tripped them money using hawala) decided that the risk of non-payment on the bonds was lesser than what the “markets” had determined.

Additionally this perception of a higher risk as projected by the “markets” was mitigated by *both* the higher rate or return (vs. FCNR accounts) and a sense of emotion that many Indians felt (NRI’s and Indian’s who used hawala).

Distance, my friend, can sometimes eliminate parallax in vision. What matters more is the right perspective – regardless of distance.