India: The Effects of War and Peace on Foreign Aid
India: The Effects of War and Peace on Foreign Aid
Foreign aid is the transfer of goods and services from donors to recipients for free or at a subsidized market price. The objectives of foreign aid are to spur economic growth and to relieve the harsh living conditions brought about by predicaments such as war and natural disasters. The prevailing war or peace in the recipient country influences foreign aid distribution in terms of type and amount. This essay investigates the effects of war and peace on foreign aid distribution in India. Analysis indicates that multilateral aid that is development-oriented increases in times of peace and decrease when there is war. Bilateral aid and humanitarian assistance, on the other hand, increase during times of war and decrease when there is peace.
Foreign aid is offered in different ways and forms including goods, manpower, technological assistance, and military among others. The type and amount of foreign aid offered invariably depends on the prevailing economic, social and political conditions (Gulrajani, 2011). Peaceful conditions attract development-oriented foreign aid in terms of capital transfers (Mawdsley, 2014). India is one of the few developing countries that have had relative peace for long spells. The country's only wars in the past have come against its neighbors, Pakistan, and China. One advantage that has accrued to India, as a result, is that it has received a lot of foreign aid aimed at strengthening its infrastructural build.
India receives more multilateral aid than bilateral ones. In 2013, for instance, India received US$ 3.2 billion from financial lending institutions, the World Bank and the International Monetary Fund (Sahoo & Sethi, 2013). Its multilateral aid net had increased from US$ 1.6 billion in 2012. However, during the same period, its bilateral aid decreased drastically by more than 25%. In 2012, India received US$ 127 million and in 2013 it received US$ 98.3 million (Sahoo & Sethi, 2013). The trend is clear, during the times of peace, more development-oriented multilateral aid is offered as opposed to problem-specific bilateral aid.
One of the upsides of multilateral aid is that they are usually offered under strict conditions and specifications so as to reduce misappropriation and corruption (Paul & Vandeninden, 2012). Therefore, the Indian population benefits in that the money is used wisely. It becomes more effective that aid that is offered without any specifications. The method has led to decreased poverty levels in the past five years from 35% to 30% (Mawdsley, 2014). Only around 400 million people live below the poverty line as a result of these efforts. Furthermore, India has been able to develop its nuclear plants and is even committing more than US$ 2 billion to its nuclear research program (Sahoo & Sethi, 2013). India has also developed into a donor. In 2012, it gave Bangladesh a loan of US$ 1 billion and gave some developing countries in Africa a net loan of US$ 5 billion in 2013 (Fuchs & Vadlamannati, 2013). The adverse effects of distribution in times of peace are that the aid is mainly abstract and neglects developing the key sectors that drive the economy and its growth. As is evident, India is an economic growth paradox. It prides itself as an economic superpower capable of starting its aid programs to other countries yet more than 30% of its citizens live in abject poverty (Mawdsley, 2014). Nearly all the financial aid that is received is misappropriated or used in purchasing instruments and technologies that do not have direct value-addition to the ordinary citizen.
In times of war, foreign aid in terms humanitarian assistance increases while development-oriented support tends to decrease (Gulrajani, 2011). The aid is aimed at mitigating the adverse effects of war. The upside of this effect on distribution is that the people receive assistance to fulfill their most basic needs, which are food, water, and shelter. For instance, in 1999 India went to war with Pakistan over a region that both countries claimed. The US and UK provided humanitarian aid worth US$ 300 million during the three months that the war subsisted (Fuchs & Vadlamannati, 2013). The Indian government used this amount to build houses for the affected people in Kashmir and boreholes to provide water, the primary source of conflict. It also refurbished more than 70,000 schools in and around Kashmir to support acquiring of education. During the same time, the overall foreign assistance from bilateral donors decreased by US$ 400 million to US$ 430 million (Sahoo & Sethi, 2013). The same trend was witnessed in the Sino-Indian war in 1962 and Indo-Pakistani wars of 1965 and 1971. War increased humanitarian aid but reduced development-oriented aid. The downside of this distribution is that there is little development because most aid is relief-oriented and tends to meet the day to day needs. That is why so many people in India do not have adequate housing and access to schools, hospitals, and many infrastructural components.
As has been illustrated, the extension of foreign aid to India has not been successful in alleviating the poverty levels even after the cessation of the Indo-Pakistani war in 1999. Foreign aid has helped to reduce the poverty levels though not proportionally. In 1999, the poverty levels stood at 42%. Currently, they are at 30% (Sahoo & Sethi, 2013). The amount of reduction is not proportional to the amount of foreign aid received. It implies misappropriation and mismanagement of foreign aid funds. India should not have more than 400 million people living below US$ 1.25 a day yet it can afford to lend African countries more than US$ 5 billion (Mawdsley, 2014).
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In summary, foreign aid is vital in promoting economic development and growth through reducing poverty levels and providing basic human needs during or after a war. The type and amount of foreign aid provided depends on the prevailing conditions. A war-torn country or one recovering from war is usually provided with humanitarian assistance in bilateral structures. These countries also receive less development-oriented foreign aid. The reverse is also true. Countries, especially those experiencing peace should focus their foreign-assisted development efforts on improving the welfare of its citizens to reduce the poverty levels.