WASHINGTON: India has received more foreign aid than any other developing nation about $55 billion since the beginning of its first five-year plan in 1951, “but it has been an unmitigated disaster for the country,” according to a study.
It has acted as a catalyst and an encouragement for the Indian economy breeding corruption, rent-seeking and graft, it observes,
Shyam Kanath, an associate professor of economics in the School of Business and Economics, California State University, is the author of the study conducted for the Washington-based Cato Institute and was noted by elements critical of India in the congressional debate on an amendment to the American Development Assistance.
The study says India is a paradigmatic case of the failure of government-sponsored aid. India has had one of the lowest rates of growth of all developing countries and remarks one of the protest elections in the world after almost 45 years of aid-induced centrally planned development.
In 1988-89 some 101 of the country’s 222 largest public-sector companies recorded losses and contributed to a central deficit five times as large, in relative terms, as the US budget reflects. Today, after nearly 45 years of planned” economic development, India’s annual per capita income remains around $300. AL most 40% of Indians lives below the official poverty line and the absolute number of Indians in that category increased sharply between the late 1950s and the mid-1980s.
From 1950 to 1985, the study points out, per capita income in India grew at a meager average annual rate of 1.5%, compared with rates of 6.5 to 6.5% in the newly industrializing countries of Hong Kong, South Korea, Singapore and Taiwan and three to four percent in the three south-east Asian nations of Indonesia, Malaysia and Thailand.
Over 20 million Indians are on the public pay-roll and two per cent of all formal, above-ground employment is in the public sector.
Confiscatory tax rates combined with a jungle of red tape permission to open a hotel involves 45 applications and over 25 different “government agencies have led to the growth of one of the largest thriving underground economies in the world where an estimated 50% of monetary activity is generated, it says.
It cites a few exceptional cases of aid successes-such as critical food relief in the early 1950s and again during the mid-1960s,
Article extracted from this publication >> June 10, 1994
