Economic Sense of the Deal

My last post “Phew! Finally” was about the Indo-US Civil Nuclear agreement and so is this one, on the day when NSG waiver for the nuclear trade with India.

This country has seen some dumb arguments of anti-americanism from the Left and most of us would’ve have laughed off those arguments. The more serious arguments were from the right and the scientific community. They were saying they weren’t against strategic partnership with US, however they argued that India would have to give up its right to test, as the cost associated with a test would become huge once India invests in Nuclear plants.

There was more merit in this argument than the left’s boogie about India becoming an American client state! And at first sight it does appear very plausible.

However, I feel this argument doesn’t hold up either. Let us consider the economic costs involved.
India fought to defend Kargil in 1998, and it is estimated to have direct cost about Rs.15,000crores in 1998/99. That wasn’t even a full scale war, and that was a decade back (Adjusted to inflation, today it’d worth more than Rs.30,000crores).

A full scale war lasting even 15 days will cost around 1,00,000crore. This is excluding indirect damages a war brings in!

The estimated Rs.4,00,000 crore to be spent on Nuclear Plants, are not going to be spent in a day. It is likely to be spent over 25 years. So, Assuming half of it will be spent in 12 years, and a situation develops where it is imperative for India to fine tune its nuclear weapons and needs to test, then it may at most loose $40billion (If all of the money invested is lost, which is unlikely).

Considering the strength of Indian economy, and its exchange reserves of more than $300Billion today ( and likely more than Half trillion in another dozen years), this amount isn’t something that will cause the govt. of the day, to loose a night’s sleep!

It is estimated we need more than $500Billion (Rs. 22.5 lakh crore) to build out infrastructure alone within next 10 years, as per this article –

If India needed half a trillion dollars for infrastructure alone, and only about 10% of that amount is spent on Nuclear power and it has to loose that entire nuclear investment to conduct a Nuclear test (due to a dire security condition), why wouldn’t India test?? Would a mere $40billion loss, and up to 5-6% loss in electricity generation capacity stop India from safeguarding its national interest?
If not, then how can this deal be considered as sell out??

Nuclear tests should never be conducted casually and nuclear weapons are not really weapons of war, they are weapons of deterrence. A nuclear test is a way of demonstrating the capability (more than anything else). So, only time we want to remind the world of our adequate deterence is when we are threatened with our survival by a grave situation. In such a situation it is likely that most countries will understand our need for such a test. In case they do not understand, our monetary losses are not going to be high enough to stop us.
Nations of the world rightly want to stop proliferation (vertical or Horizontal). And what people opposed to nuclear deal are asking for is in reality for India to be included into the NPT as a nuclear weapons nation with attendant privileges. While that is a splendid goal to have, we can only achieve them in steps. What happened today can be the first step towards that goal.

Currently, India is the only country that is a special case of a non-signatory nation with privileges. Once the world gets used to that status and we continue to behave responsibly, then our case to be a nuclear weapons state as per NPT becomes strong. But, it may take another generation before that happens – Such is the diplomacy and affairs between nations.
So, It defies belief – the extent of opportunism and Hypocrisy within our politics & Academic circles, in forwarding frivolous arguments and trying their best to scuttle what is good for the country and the world at large.