Effects of War and Peace on Foreign Aid to India

Introduction: Origins of Organized Foreign Aid

Foreign aid has been an organized effort since the end of World War II. Through outright aid, investments, loans, and grants, industrialized countries sought to help underdeveloped countries recover from the devastation of war. Predictably, some nations also used foreign aid to further their own interests, sometimes to the detriment of nations such as India, which relied heavily on foreign assistance. India's leadership, mindful of the dependence and drain on the country's resources, eventually developed a more India-centered approach that has strengthened the economy and reduced poverty and conflict. However, poverty and internal warfare have not been completely eliminated and remain serious challenges for that vast nation.

Organized foreign aid as we know it initially developed in response to the widespread damage and economic instability caused by World War II. The current structure of foreign aid is largely based on international efforts begun immediately after the war (Singh, 2008, p. 1). Using such agencies as the United Nations Relief and Rehabilitation Agency (UNRRA), the World Bank, the International Bank for Reconstruction and Development, the Marshall Plan, and the Colombo Plan, nations first sought to rebuild countries devastated by the war (Singh, 2008, p. 1). Foreign aid typically takes the form of outright aid, investments, loans, and grants. Though much of the early foreign aid was a multinational effort, it was also given by individual nations pursuing their own objectives. During the Cold War in the 1950s, the United States was providing up to two-thirds of all foreign aid in order to prevent countries from "going Communist," mixing developmental aid with military aid (Singh, 2008, p. 1). The Soviet Union, the Cold War rival of the United States, also developed aid programs to assist developing nations while advancing its own interests. As industrialized nations such as the United States sought to assist developing countries, those donor nations simultaneously sought to increase their power and influence throughout the world.

Effects of Peace on Foreign Aid to India

Peace has both positive and negative effects on foreign aid to India. During extended periods of peace, India has been able to shift from slavish reliance on foreign contributions of food, materials, money, and personnel to a far stronger infrastructure that allows India to better manage its own economic cycles, prepay some of its expensive debts, and even refuse additional aid offered by countries with ulterior motives (Singh, 2008, p. 3). Ironically, peace has also had a negative effect on foreign aid to India, at least historically. Though India has received great sums of foreign aid, that aid has historically been inadequate to meet the country's needs. Because foreign countries have not been in critical need of India's cooperation during peacetime, there was less urgency to address India's internal economic needs. Furthermore, the peacetime efforts of some donor countries focused on exploiting India's resources rather than developing them.

A clear example of this dynamic is India's Green Revolution of the 1960s, which was largely funded and driven by the United States and its corporations in order to apply industrial agricultural techniques — particularly chemical fertilizers and pesticides — rather than environmentally sound methods that cooperate with nature. As a result, India's natural resources were exploited and contaminated, and India was largely kept in dependent uniformity on Western aid, with its economic and natural diversity severely compromised (Singh, 2008, pp. 7–9).

Effects of War on Foreign Aid to India

War also has both positive and negative effects on foreign aid to India. Eager to consolidate their influence, donor countries turned greater attention to India's vast resources — both its large population and its natural wealth. This focus led to the development of the "Aid India Consortium," which helped India emerge from severe poverty through outright food contributions, investments, loans, and grants (Singh, 2008, p. 3).

War also has negative effects on foreign aid, however. During the First Gulf War of 1990–1991, for example, an economic crisis severely worsened India's balance-of-payments position — its ability to repay principal and interest on foreign aid loans — creating a large trade deficit, greater restrictions on imports to address that deficit, and a resulting devaluation of India's currency along with a decline in its industries (Singh, 2008, p. 10). Consequently, both peace and war generate benefits for foreign aid while also presenting difficult challenges.

Conclusion

Organized international foreign aid began at the end of World War II and has continued in one form or another ever since. Originally multinational in character, foreign aid also developed into unilateral outright aid, investments, loans, and grants, depending on the motivations of the donor nation. Peace and war each have both positive and negative effects on foreign aid to India. While both conditions stimulate foreign aid and its benefits, both are also capable of undermining the effectiveness of that aid for the receiving nation. Fortunately, Indian leadership has leveraged foreign aid to lift the country out of severe poverty and toward greater economic self-sufficiency, moving the nation from economic dependency to a position of meaningful strength in global markets. Foreign aid has been one factor in that transformation, eventually and perhaps inadvertently helping to reduce both poverty and warfare in India — though poverty and internal conflict remain realities of Indian life.

References

Organization for Economic Co-operation and Development. (2013, November 15). Country statistical profile: India. Retrieved January 18, 2014, from http://www.oecd-ilibrary.org/content/table/csp-ind-table-en

Sachs, J. (2005). India's market reforms: The triumph of hope over fear. Penguin Group.

Singh, A. K. (2008). Overseas development assistance: An Indian perspective. Retrieved January 18, 2014, from www.sansad.org.in/ODA_paper.doc

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