Crops In Foreign Fields
India's surging foreign reserves can help turn it into a donor of 'untied' aid
illustration by Sandeep Adhwaryu
Murli Deora, Rajya Sabha member and longstanding friend of Dhirubhai Ambani, in an article in the Business Line
on July 7, 2002, recalled that the latter had a few days before his illness expressed concern over the deployment of our surging foreign exchange reserves. "What’s the use? The government is investing them in US treasury bonds which yield 2.5 per cent while borrowing at 11 per cent." Today, the reserves stand at US $75 billion and one should not be surprised if the figure crosses the 100-billion mark in the foreseeable future. In fairness, the government has taken a number of positive steps taking advantage of the comfortable reserves. These include prepayment of several foreign loans ahead of schedule and retiring costly debt. One area which needs some thinking though is our policy towards foreign aid—both as recipient and as donor.
There is no denying that the foreign aid policy pursued by several donors over the past several years has been in the form of ‘tied aid’, namely aid limited to procurement of goods and services from the donor country. In...