Dragon fire makes India give up loan for Arunachal

India will not seek an “external loan” for development projects in sensitive border areas such as Arunachal Pradesh, external affairs minister SM Krishna said on Monday, adding that money would now be raised from internal resources as external loans were “unstable”.

The decision may be seen as a diplomatic victory for China, which tried to block an Asian Development Bank (ADB) loan to India.

In June, it vehemently opposed an ADB loan of $60 million for a watershed development project in Arunachal. Beijing said the state was a “disputed” territory and ADB had no business granting the loan, as it would be indirectly acknowledging that Arunachal was in India.

Though the Chinese veto was overruled with the US, Canada and other Western donors coming to India’s aid, Beijing showed its muscle by declaring that the bank must issue a disclaimer while granting the loan that it was not commenting on the political status of Arunachal.

So far, ADB has not issued a clarification and Indian officials are tightlipped about whether they will accept the loan with a rider.

Anticipating a rider, the government has decided to raise money for the project from its own resources.