German Chancellor Helmut Kohl had conveyed Bonn's position on the issue of German assistance during a meeting with President K R Narayanan here on Tuesday, according to German media reports.

The development aid to the tune of around 300 million DM for 1998 was cancelled by the German government at the last moment even after high-level delegations from the two countries had assembled here to finalise the modalities of the aid package.

Narayanan was also told by Kohl that India had been the preferred country for German development aid and that nearly 13 billion DM had been disbursed so far. Indian officials accompanying the President said that the nuclear tests are unlikely to deter German trade and business captains from investing in India, particularly in infrastructural development, power, automotive and pharmaceutical sectors. This was evident as aGerman financial institution has agreed to provide low-interest loans of 6.2 billion DM for setting up of 4,500 MW power projects by the National Thermal Power Corporation, they said.

Narayanan, who has since arrived in Lisbon (Portugal) on the second leg of his four-nation tour, described his visit to Germany as ``an exercise of goodwill.'' India's stout defence of nuclear tests put up by Narayanan during his talks with German leaders has been widely reported in the local media and is being seen by analysts here as a major diplomatic offensive to enlist support for New Delhi's security concerns.

Indian officials said President Roman Herzog's remarks at the banquet hosted in honour of Narayanan that the nuclear tests should not be allowed to ``overshadow'' Indo-German relations in the long run had sent the right signals in determining the future course of bilateral ties.

They said Germany was among the non-nuclear states with which India was engaging in a dialogue on issues relating to security anddisarmament. Though there were differences between the two countries on the nuclear question, Narayanan's parleys with the German leaders yielded ``positive response'' to New Delhi's position on the rationale behind the tests.

The German Foreign Office, according to German media reports, does not consider nuclear tests to be a ``closed chapter.'' It was Germany's view that even though the Indo-German relations were widely appreciated in totality, one cannot help but consider the tests to be a ``disturbing factor,'' the reports said.

Indian officials admitted that Germany had made ``a friendly suggestion'' to New Delhi to sign the Comprehensive Test Ban Treaty (CTBT) without any delay but asserted that the German leaders did not exert any pressure. Despite differences over the nuclear tests, strengthening bilateral trade and economic contacts was stressed by both the countries, with Narayanan making an impassioned plea to the German industry not to ignore the Indian market.

According to German officials,the fall of the rupee and an additional import duty of four per cent imposed by India led to a decline of German exports. German goods became dearer and thus were less competitive in India, they said.

German exports to India dropped by 4.9 per cent in 1997 to 4.46 billion DM, with over half of the deliveries being machines and electro-technical products. The Indo-German Chamber of Commerce expected only a ``difficult recovery'' of German deliveries this year, thus delaying the reversal of marginal downfall in bilateral trade.

In the first four months of this year, total bilateral trade was 2.78 billion DM, with the balance of trade slightly favouring India. Last year, bilateral trade was estimated at 8.6 billion DM.