The freezing of the German aid, which was to be given as fresh assistance for 1998, followed cancellation of the three-day annual Overseas Development Aid talks after Germany condemned India for the nuclear tests. "Following yesterday's nuclear tests by India, the minister for economic cooperation and development, Carl-Dieter Spranger, has called off the government talks with India on development policy," his ministry said in a statement.

Denmark also announced that it would freeze its development aid to India and Australia and New Zealand recalled their high commissioners from New Delhi for consultation.

A report from Tokyo said Japan was today considering reviewing its billion dollar aid loans to India because of New Delhi's "extremely regrettable" nuclear tests. Japan's foreign minister Keizo Obuchi metthe Indian ambassador here to lodge a formal protest and warned him that Tokyo was considering reviewing its huge official development assistance (ODA) loans.Japan is India's largest ODA donor. In the year to March 1997, Japan gave $1.1 billion in ODA loans to India.

While news that there was no change in President Bill Clinton's proposed visit to the country helped boost hopes somewhat, investors pointed out that a lot would clearly depend on the government's damage control mechanism and its approach to signing the CTBT and other treaties -- US officials indicated that this would be an important factor in deciding on sanctions.

Top finance ministry officials, meanwhile, sought to discount fears of wide-ranging sanctions lead by the US and pointed out that the US had huge business interests in the country which would lobby against precipitate action. They argued that if, for example, the US Exim Bank decided not to provide guarantees to US companies investing in India, this would certainly raise the costof loans. Yet, the increase was unlikely to be large enough to cause these companies to leave the country. "Do you seriously think companies like Enron will forsake projects worth billions of dollars?", a ministry official said.

In Singapore, World Bank's regional manager declined to comment on the fear that the US and other countries would vote against its aid to India.