Should India Accept World Bank Aid?

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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 “giant country that both dispenses and receives aid, a nation touted as a commercial superpower that has more poor people than any other nation.” That contradiction became the subject of much public debate in the UK, resulting in the country’s International Development Secretary agreeing to review the UK’s aid budget for India and perhaps shift funds elsewhere.

As the Press Trust of India reported Wednesday, it’s the World Bank’s turn to get into the act. In an effort to strengthen and improve India’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 “free money”? The World Bank’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 “emerged” as contended by U.S. President Barack Obama. It’s a strange optic that on the one hand we’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, it’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.

I’m reminded of the argument made by economist Dambisa Moyo in her book “Dead Aid”, 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 “emerged” 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, there’s $1.5 billion in government coffers to build our own roads?
More on WSJ.

2 Comments

  • Amit says:

    I believe world bank is like a money lender to all the poor nations to make them more poorer , the motto of the world bank (backed by developed nations specially USA ) is NOT allow them to be self dependent. Look at all the African countries where they have taken advantage of their internal conflicts and is able to penetrate their money by way of AID ,,, like that they will never come out of this crunch and developed nation can use their resources at much cheaper prices or at FREE OF COST (FOC),,further i believe the aim of this so called AID is to bribe the top representatives of the countries so they agree with what ever these countries want them too.. In fact now these countries backing India for permanent seat in UN is also a conspiracy to make China, Pakistan , Iran etc more aggressive against India,In fact UN is itself a failure on the international front because since its inception in 1940’s it is unable to prevent 15 wars plus other numerous civilian casualties from 1940’s -2010……..

    I think India should not accept this FREE AID from world bank ,, we are capable enough to deal with our problems,, altough India is a corrupt country but we are never short of money $$.

    Thanks
    Amit

    • Rajneesh says:

      Agree with Amit on certain points.. World Bank is an International Chor Financial organisation that works in coordination with money and wealth created by crook nations who keep looting third world countries and laundering their money safely by selling Arms, Weapons of Mass destructions to same nations ..all these crook countries are like CATS cleverly trying to negotiate quarrels in between stupid monkey nations and also asking them to beware of each other by persuading to buy fighting planes, war technologies…and when financial disasters happen…coming with WORLD BANK MASK of financial aids and help packages on thoroughly calculated strategies and interests..

      The world banks aids and loans are cosmetic gestures under the shadow of other bigger deals.. India and Pakistan are also its victims, Richer nations by the channel of World Bank use indirectly our money to lend us and make us more debt prone.

      Its such a vicious nexus seems hard to break. We think our leaders are doing great job.. ! No political leader in INDIA of any ruling party at center ever wishes heart fully to resolve Kashmir issues..terrorism issues..Naxalities issues…all such issues make our leaders and corrupt officers richer by negotiating Arms deals..war technologies…minting money as hefty commissions.., formulating internal security programs with expenditures and policies suiting their political situations..wasting public’s money worth billions of dollars..

      First destroy a nations wealth with unnecessary war expenditures, terrorism..internal disturbances..then burn billions of dollars for maintaining peace and restoring security..then become financially imbalanced and bankrupt..finally start begging as an International beggar or accept Charity in disguise from WORLD BANK. What a nice democracy and economics we believe in…!

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