Foreign money in India

Economic development through foreign aid and foreign investment has dominated the international economic scenario for the last three decades. Economic theorists generally consider aid as bestowing an unquestioned advantage to the aid recipient and highlight its sacrifice aspect on the part of donors. The author questions this conventional wisdom on the subject and points out the unique benefit it confers on the donors and its economic cost to the aid recipient. Foreign aid is now being used by rich countries as a powerful instrument of export promo tion at prices controlled by them, enabl ing them to maintain a high level of effective demand for their technostruc ture, while, at the same time, landing the developing countries in debt trap. Making a case study of the American PL 480 aid, the author establishes how this outlet bailed out the American farm economy from chronic overproduction in the nineteen fifties and sixties and gave the USA a dominating share in the global wheat market. Foreign private investment, considered an alternative to aid, has its own drawbacks. Apart from some of the questionable methods of multinationals, the study observes the existence of heavy pressure on balance of payment which foreign controlled investment exercises.

This study highlights the need to move away from aid lead growth strategy to wards a policy of self-reliance which has hitherto merely remained a pious reso lution in the Indian planning scenario.