ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Vinaya SwaroopSubscribe to Vinaya Swaroop

Foreign Aid to India

This article shows that foreign aid to India merely substitutes for spending that the government would have undertaken anyway; the funds freed by earmarked aid are spent elsewhere. Moreover, in passing external assistance earmarked for the states, the central government makes a reduction in transfers it would have otherwise made to the states. From the country's perspective these fungibility results could be good; domestic spending priorities - inter-sectoral and inter-regional - are unaffected by foreign aid. For the donors, however, the results indicate that success of their projects, as measured by the conventional benefit-cost analysis, does not tell the whole story; the marginal use of their money and its overall development impact could be different from that intended.

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