← All questionsGS2 · 2014 · International Relations ·Tied Aid Conditions for India
MAINS 2014
GS2
12.5 marks

Some international funding agencies have special terms for economic participation stipulating a substantial component of aid be used for sourcing equipment from leading countries. Discuss merits of such terms and whether there is a strong case not to accept such conditions in the Indian context.

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9 min
200 words
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What the examiner wants

Discuss merits of tied aid requiring procurement from donor countries and whether India should reject such terms.

DiscussExplain the different sides of the issue, use evidence, and finish with a balanced view.

Demand-wise check

  1. 1Merits: cheap long-term credit, advanced technology, project delivery skills, strategic ties (Japan)≈35 words
  2. 2Demerits: higher costs, less domestic industry participation, dependence, reduced competition≈35 words
  3. 3Indian context: growing economy, Make in India, ability to raise capital; but large infrastructure gaps need concessional funds≈35 words
  4. 4Middle path: accept selectively with technology transfer and local content conditions≈35 words

Open in about 30 words and close in about 30.

Answer plan

Tied aid explainedMeritsDemeritsIndia's caseConclusion

Where marks usually go

  • Rejecting tied aid outright without merits
  • No concrete example like Japan's STEP loans

Draw this

  • Table: tied vs untied aid features

Value addition

  • ExampleMumbai-Ahmedabad High Speed Rail is funded by a JICA STEP (Special Terms for Economic Partnership) loan at about 0.1% interest over 50 years, tied partly to Japanese procurement.JICA, 2017
  • PolicyOECD Development Assistance Committee recommended untying aid to least developed countries in 2001.OECD DAC, 2001