How did India fight back when the United States imposed sanctions on India?

Though the war between Russia and Ukraine is being fought with weapons, Russia is fighting another war with a different set of weapons. The United States and its allies are in an economic war with Russia with sanctions. Almost 24 years ago, India faced a similar situation when the United States and its allies imposed sanctions on India.

Exactly 24 years ago, India conducted a series of nuclear tests in Pokharan, Rajasthan, on 11 May and 13 May 1998. These tests fortified India’s place as a nuclear power in the world. For a country like India surrounded by neighbours who pose greater threats, its nuclear arsenal is the most potent line of defence.

Although the nuclear test was celebrated in India, many countries led by the United States condemned this series of tests. Nations used strong languages to warn and threaten India. The president of the United States went as far as saying, “South Asia is the most dangerous place on earth.”

Heavy economic sanctions on India followed the warnings. The United States suspended all aid to India except humanitarian aid. Loans and grants from foreign institutions, including World Bank and IMF, were also suspended. Other Western countries imposed similar sanctions on India.

These sanctions had the power to cripple the Indian economy. Just 7 years ago, India came out of an economic crisis and opened the Indian economy. The sanctions resulted in an immediate stop of Foreign investment in India. The Atal Bihar Vajpayee government was staring at a similar situation like 1991. The Vajpayee Government took an out of the box way to deal with the possible economic crisis.

The Indian government launched the Resurgent India Bonds (RIB) for Non-Resident Indians (NRIs) on 5 August 1998. The bonds were issued by the SBI and planned to bring $2 billion. However, the NRI community opened their wallet to the government. In just 2 weeks, RIBs bought $3.1 billion to India. The number reached $3.5 billion on 24 August 1998. The bond sale ended with $4.5 billion in investment. To put it in context, the Indian Government took a $1.5 billion loan from IMF and World bank in 1997.

These bonds helped the Vajpayee Government to increase the demand in the Indian economy by launching many successful infrastructure projects. In 1998, the Indian Government and NRIs together fought and defeated the United States and its allies in the economic war they wanted to impose on India.