Assessing Foreign Aid to South Asia

Book Review

By

Randeep Wadehra

Foreign Aid in South Asia Edited by Saman Kalegama

Sage. Pages: xx+317. Price: Rs. 750/-.

During its nascent years – 1947 to mid 1960s – India was often dubbed as a “basket case”. Its poor agricultural and industrial productivity, the teeming millions deprived of even basic necessities, and perennial food shortages had almost ensured this image’s sweep and perpetuity. However, things improved after the Green Revolution even as the foundations laid during the Nehruvian era for the development of core industries and infrastructure began to bear fruit. Further, the picture would be incomplete without the role played by Overseas Development Assistance (ODA). Although most of it came with strings attached and the choice before India was limited as far as purchase of vital capital goods and other products and services were concerned the development aid from various international sources had long term positive consequences.

In fact, foreign aid has come to play a crucial role in the economic progress of developing economies, and those in South Asia are no exception. However, over a period of time, the principles and scope of foreign aid have undergone several changes. Further, the 2005 Paris Declaration has, among other things, underscored the need for recipient countries to devise their own development strategies. This, apart from giving more options to developing countries, facilitates the deployment of aid on a more dynamic basis. Moreover, there has been a change in the profiles of aid donors. Emerging economies like China, the Middle East and even India have become important players in the ODA. Therefore, along with the North to South flow of aid, there are now increasing instances of South-South economic cooperation, leading to the flow of aid from the emerging economies to those still at the initial stages of growth trajectory.

Moreover, the circumstances of South Asian countries have changed to such an extent that they are increasingly able to mobilize domestic resources and confidently engage in commercial financial markets. However, as the introduction to the book observes, “…whilst circumstances have changed, the role of the ODA in many cases has not been reassessed in this context. Therefore, an exhaustive analysis of this nature will give a better idea as to the required role of the ODA in development from the perspective of the partner country.”

This book takes a close look at the role of foreign aid in the development of various South Asian countries. While doing so the study takes into account the special political, economic and other related factors into account. For example, the needs and performance of a war-torn Afghanistan would be different from those of, say, a more vibrant Bangladesh. However, certain basic requirements would remain constant, viz., the aid must help enhance capacity building even as it facilitates sustainable development of an economy. As said earlier, different countries will have different definitions of what the terms “capacity building” and “sustainable development” signify.

This is an exhaustive study of the various aspects of foreign aid to different South Asian countries, ranging from India to the tiny Bhutan and Maldives. It would certainly be useful to economists, research scholars and policy makers.

Published in Tehelka's Financial World on June 13 2012