FOREIGN
AID IN INDIA
Gabriela Monasterio
Comparative Politics 1155
Paper 2: Question 2
November 28, 2016
Honorable President Pranab
Mukherjee,
I
address you today to inform you of my position on foreign aid and national
development for India. I hope that this briefing will help inform your
decisions for India and her people.
India
has grown since its independence in 1947; it has transitioned from a socialist
to a neo-liberal ideology, and we have grown to be more accepting of capitalism
and foreign investment in recent years (Atul: 1998). Our country is the
recipient of foreign aid, and that aid has been increasing over time, from 616
million USD in 1961 to 2.9 billion USD in 2014. There has been a slight
decrease in our aid received recently, as our peak was 3.2 billion USD in 2011,
but overall, there is a pattern of increased aid to our country (World Bank
Group: 2016). We are trying to transition from an aid recipient to a donor, but
now we are stuck in the middle. Our donations should exceed our received aid
this fiscal year, but the world sees us as a “needy donor,” a state that is
trying so hard to be liberal that it ignores its own domestic policies (Fuchs
and Vadlamannati: 2013). In order to escape this label, we should forgo
government-to-government aid, instead focusing our efforts on foreign
investment and economic growth.
I believe that it
is important for us to continue to provide aid despite our current status as an
aid recipient because of the need for development in Southern Asia and the
influence it gives us over the region. Publicly, of course, we must declare
that it is only out of the goodness of our hearts, but behind closed doors, we
will use the aid to curry favor. I have come to this conclusion by studying
Lichbach and Zuckerman, whose culturalist, structuralist and rationalist
perspectives I find intriguing. Their rationalist perspective calls for the
cool interpretation of a situation, and choosing the “rational” or most logical
and beneficial action (Lichbach and Zuckerman: 1997). A rationalist reading of India’s
situation leads me to conclude that giving aid to our southern neighbors in
South-South strategy is the best solution. We have already begun this strategy
by supplying much of our aid to Bhutan and the Maldives, countries which are at
a similar development level to India, but have much fewer resources. The only
country in our region that we do not offer aid to is Pakistan, for obvious
reasons. By doing this, we will gain an advantage over our needy neighbors,
boosting our own economy as they give us more favorable trade and diplomatic
agreements. If you think this is disingenuous, I would like to remind you of
when the United Kingdom cried ingratitude at us for buying French planes
instead of British ones, citing that one of their reasons for giving us aid was
to entice us into purchasing their planes (The Logical Indian: 2015). We can,
and should be influencing those around us, for our benefit and theirs. If we
give other countries aid, they will be more likely to purchase goods and
services from us, driving our economy. The best way for India to become a
superpower in its own right is to have high and continuous economic growth
(Sharma: 2013). Although Prime Minister Singh’s redistributive policies did
help de-stratify the wealth in the early 2000’s, they did little to address the
rapid rate of inflation and high deficits. His corrupt and inefficient policies
that feed and employ millions cost our taxpayers billions annually. These
policies of less redistribution and greater focus on the economy are also
supported by William Easterly, in his piece To
Help the Poor. Here, he shows that a GDP growth of just 1% will cause a 1% increase in the incomes of
the lowest 20% of society (Easterly: 2001). This makes an excellent case for
greater investment in India and the countries around us. The people obviously
agree that economic growth is the only way out of poverty, as they voted the Bharatiya
Janata Party in, a party that ran on renewed investment and completing key infrastructure
projects (Manuel: 2014).
The aid we receive
is as you have once said; “a peanut in our total development spending.”[1] The approximately 2
billion USD that we received annually in the early 2000’s is only 0.2% of
India’s GDP (NORRAG: 2010). We spend most of our received aid on
infrastructure, but much of it also goes to improving the lives of the Dalit,
allowing them access to many services they were denied in the past (Jha and
Swaroop: 1999). Those who worry that India would fall into ruin, becoming a
society dominated by structuralist class struggles is misguided. They argue
that government institutions are the only way to develop India, and by claiming
this, they crush the people’s will. They are eroding our Hindu culture with
their western safety nets, taking charity away from the people. The reforms
implemented by NGOs and our government will not disappear. Dalit women will
still be able to give birth in hospitals, and they will not soon forget the
lessons of sanitation and empowerment that they were taught during India’s
period as an aid recipient (Rowlett: 2015). India’s population will not stage a
Marxist revolution if we take away foreign aid, and the only changes will be
for the better.
Some say that
redistribution is the only way for the lower classes to rise above the poverty
level. They believe that economic growth is not enough to pull these people out
of the depths of poverty, and that the government must intervene in the social
and economic spheres. These people look through a culturalist lens, crying out
that what works in one country will not necessarily work for India (despite the
knowledge to the contrary), and they wish to take more time studying the problem, asking for more foreign aid. They reject the notion that economic growth will
lead to prosperity. They are not content to let the government stay small, they
wish to have it take over every facet of our lives. They are wholly and
undeniably refuted by several of the greatest political scientists of our time,
including Easterly as I have mentioned above, Collier, Fukuyama, and Smith.
Collier and
Gunning argue that many countries in Africa have not grown at the rate they
were expected to, mostly because of the factors surrounding them. The largest
factor that they cite is lack of investment as well as failure to deliver basic
services. They also note that “even widespread reforms in [public services]
might not be sufficient to induce a recovery in private investment, since
recent economic reforms are never fully credible.”[2] Collier and Gunning warn
the Sub-Saharan countries, but they also warn us: reform now, or never recover
(Collier and Gunning: 1999). Fukuyama rings true in much the same way in his
piece The Necessity of Politics,
warning us about the dangers of decaying states. India is beginning to fit some
of Fukuyama’s criteria for a failed state, most obviously “failure to deliver
basic services that people demand.”[3] (Fukuyama, 2011). According
to the BBC, 40 percent of the world’s malnourished children live in India, and
over 300 million Indians live on less than 1.25 USD per day (Rowlett, 2015). That
is a failure of the government to provide the service of a stable, healthy life
to its people, no matter their caste. Adam Smith’s argument in The Wealth of Nations is simple: remove
government involvement, or limit it where it is necessary. By continuing to
take foreign aid and using it to subsidize, we are increasing the involvement
of the government in the free market, something that Smith says can only do
harm (Smith: 1976). Even champion of Indian redistribution Atul Kohli admits
that “the Indian state’s capacity to implement pro-poor, redistributive
policies has always been quite limited”[4] and that cooperation would
be critical at every level if redistribution is to be achieved successfully (Kohli:
1988). Redistribution would be costly, corruption-prone, and there is no
guarantee that it would help the people. Even if economic growth does not help
the poor as much as we hope, the economy would still be better off than it is
now, and the nation will have greater development.
Keeping all of
this in mind, I would recommend two things: first, to declare India closed to
governmental aid, with the provision that all aid that other countries wish to
be given to India be instead given to an NGO who wishes to work in India. We do
not want the poorest of the poor to go ignored, and if foreigners are willing
to touch the Dalit, let them. We will not turn down individual charity, but the
government will take no part in the receiving or distributing of funds. This
will eliminate the corruption associated with foreign aid, and it will most
likely increase the help that our lower classes receive, as there is an
inherent bias within our system. Second, I recommend further participation in
investment banks such as the New Development Bank (NDB) and Asian
Infrastructure Investment Bank (AIIB). The loans provided by these banks can
take the place of the aid we once received, and they will target more specific
areas. The hard cash limit of the loans will discourage corruption, as every
paise will matter. Indian companies will benefit from the competition for
contracts, and our economy will experience a boon.
It is not unheard
of for countries to refuse aid. In 2005, Eritrea cut itself off from most
foreign aid, declining everything from food, to development loans, to grants
from charities. Since then, Eritrea’s GDP has more than doubled, from about 1.1
billion USD to over 2.6 billion USD (World Bank Group, 2016). Measles and Polio
have been eradicated, and the infant mortality rate has plummeted. The number
of chronically hungry Eritreans is not being officially monitored, but the aid
officials in Eritrea generally agree that food production levels have stayed
consistent since the rejection of aid (Sanders: 2007). Some of this may be
attributed to the increased efficiency due to Eritrea’s autocratic leader, but it
is certain that their refusal of aid has not destroyed the poor country as many
claimed it would. Surely a country as large and prosperous as India would do
even better.
During and after
natural disasters, it is quite common for countries to refuse foreign aid as
well. Bangladesh refused aid after a garment factory collapsed, India rejected
aid after an earthquake and tsunami in 2005, Pakistan rejected aid in 2015, and
even the mighty United States rejected some foreign aid in the aftermath of
hurricane Katrina. All of the aforementioned countries did so in a mix of lack
of need and power plays. Bangladesh put out a call for help, but when they were
denied the specific tools they needed most, they rejected all aid, claiming
that they were doing a perfectly fine job without outside intervention. They
arrested the building’s owner, and attempted to diffuse the situation by
declaring a holiday for garment workers so that they could mourn and in hopes
that their anger would fade (Doyle: 2013). As you know, we rejected the aid in
hopes that the international community would redirect their aid to the
countries that needed it more, like Sri Lanka, Indonesia and the Maldives. We
also rejected the aid to show that we are a world power who does not need any
help from anyone. “India wants to be seen as part of the solution, not part of
the problem,”[5]
and to protect that image, we rejected aid despite our own precedent of
receiving aid in times of disaster (Luce: 2005). Pakistan rejected aid because
they felt that they did not need the aid, as there was “no shortage of
supplies.” (ANI: 2015). This was obviously an attempt to emulate India, the far
superior country. The United States rejected some aid after hurricane Katrina,
but most of it was simply squandered or tangled in bureaucratic red tape long
enough that it became useless (Solomon: 2007). This was also a point of pride
for them, but it also furthers my point that aid is best used by NGOs and not
the government. The US government, long praised for its exemplary democracy,
has failed its citizens in Louisiana. If the great United States has bureaucratic
problems, how can we say that we are not also held up by red tape and
malapportionment of funds? The only way to fix this is to remove aid entirely.
We must forgo it for our own sake. Thank you.
References
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———. 2016b. Net
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[1] Rowlett, Justin. "UK Ending Aid to India: Where does the Money
Go?" BBC., last modified Oct 7, accessed Nov 25, 2016, http://www.bbc.com/news/world-asia-india-34398449.
[2]
Paul Collier and Jan Willem Gunning. 1999. "Why has Africa Grown
Slowly?" The Journal of Economic Perspectives 13 (3): 3-22.
doi:10.1257/jep.13.3.3. http://www.jstor.org/stable/2646982.
[3]
Fukuyama, Francis. 2011. The Origins of Political Order: From Prehuman Times to
the French Revolution. New York: Farrar, Strauss and Giroux.
[4]
Kohli, Atul. 1998. Politics and Redistribution in India. Princeton, New Jersey:
Princeton University.
[5] Luce, Edward. "India Defends
Refusal to Accept Foreign Aid - FT.Com." Financial Times. The Financial
Times, last modified Jan 5, accessed Nov 27, 2016,
https://www.ft.com/content/90300afe-5f3d-11d9-8cca-00000e2511c8.
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