By Rupa Subramanya Dehejia
The paradox of the rich-poor country strikes again.
When British Prime Minister David Cameron was in India this past summer, India Real Time blogged about the contradiction of India being a â€œgiant country that both dispenses and receives aid, a nation touted as a commercial superpower that has more poor people than any other nation.â€ That contradiction became the subject of much public debate in the UK, resulting in the countryâ€™s International Development Secretary agreeing to review the UKâ€™s aid budget for India and perhaps shift funds elsewhere.
As the Press Trust of India reported Wednesday, itâ€™s the World Bankâ€™s turn to get into the act. In an effort to strengthen and improve Indiaâ€™s rural roads in the states of Uttar Pradesh, Rajasthan, Uttarakhand, Himachal Pradesh, Meghalaya, Jharkhand and Punjab, the Bank has agreed to provide a $1.5 billion largely interest-free loan.
This loan raises many questions. At one level, who would turn down â€œfree moneyâ€? The World Bankâ€™s terms are a bargain compared to private capital markets whether in India or abroad.
However, accepting such a large loan from an international organization seems to contradict the oft-repeated claim that India is an emerging power, or indeed that it has already â€œemergedâ€ as contended by U.S. President Barack Obama. Itâ€™s a strange optic that on the one hand weâ€™re clamoring for a permanent seat on the UN Security Council and on the other we go with our hands outstretched to another part of the UN system, the World Bank.
As I pointed out, after the Cameron visit, itâ€™s doubly paradoxical, since India is also a large donor in its own right. For instance, we recently gave a $1 billion loan to Bangladesh for infrastructure development.
The flip side is to ask why is the World Bank still engaged in India? Surely, its precious dollars are much more badly needed in the poorest and most backward of its member states, mostly in Latin America and sub-Saharan Africa. After all, when doling out from a fixed pot, aid spending is a zero-sum game: an extra dollar given to India is a dollar not given to a needier recipient.
Iâ€™m reminded of the argument made by economist Dambisa Moyo in her book â€œDead Aidâ€, where she suggests that even sub-Saharan Africa should free itself from reliance on international lending and resort to private capital markets instead. While her critics find this position extreme, when applied to a still poor region, surely her suggestion has merit in a large emerging economy such as India, which has a well-functioning capital market and is credit-worthy in international markets.
Should an â€œemergedâ€ country such as India still receive charity? Especially when we could afford to spend so extravagantly on the Commonwealth Games? Or when the government could afford to give away $40 billion worth of revenue by selling the 2G spectrum too cheaply? Surely, thereâ€™s $1.5 billion in government coffers to build our own roads?
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