Since India, unlike China, has by and large not thought of national revival in terms of insulating itself from the rest of the world community, there is no reason why it should seek to base its economic growth on the concept of self-reliance in the sense of doing away with aid altogether. Self-sufficiency in food is an altogether different proposition because the country’s economy cannot hope to develop rapidly enough if it has a backward agriculture and does not grow enough to feed its own people.
This is, of course, not to deny that the search for and dependence on external assistance has at times hurt the nation’s self-respect, exposed it to pressures and distorted the priorities of development to some extent. But all this was the product of a topsy-turvy situation in which one single country, the United States, was not only the source of much of the assistance for India and most other developing nations but also the principal agent for persuading and even compelling other western governments to extend aid. But that is no longer the position; it changed some years ago.
Nature
India’s own case illustrates the nature and magnitude of the change. This country has not received direct aid on a bilateral basis from the United States since 1971 when President Nixon cut it off in retaliation against Mrs Gandhi’s refusal to fall in line with his views on the Bangladesh issue. But no one in New Delhi has lost a wink of sleep on this account precisely because assistance from the World Bank, its soft-lending affiliate, the International Development Association, and other members of the Aid-India Consortium has not been adversely affected by Washington’s continuing displeasure. Indeed, the World Bank is known to have approved several Indian proposals for financial support in the face of opposition by the US nominee on its board of directors and this country is the biggest beneficiary of the IDA which still receives 40 per cent of its replenishments from America.
At it happened during the ‘sixties when the United States dominated the aid scene by virtue of the strength of its economy, its foreign policy ambitions and its willingness to extend substantial assistance to the third world countries, it also possessed large food surpluses. While it could not sell the latter at remunerative prices, it could use them to meet the immediate needs of countries like India, Egypt, Pakistan and others where the food output had failed to keep pace with the rapid increase in population. There was in the objective sense a complementarity of interests between the urban populations of developing countries in need of cheap and plentiful supplies of food and the farming community in America which needed to get rid of the embarrassingly large surpluses in order to avoid a dangerous slump in prices. But the balance of advantage inevitably lay with the United States and it used it to increase its leverage.
For India, 1966 and 1967 were extremely difficult years when, faced as it was with acute food shortages on account of the widespread drought, it had to wait anxiously month after month for the next instalment to be approved by President Johnson. The US administration insisted on a virtual Indian silence on Viet Nam and certain changes in the country’s agricultural policy. But to its credit, New Delhi refused to endorse the vicious US policy in Viet Nam and made only such changes in its agricultural policy as it itself regarded necessary and useful. But the experience was disconcerting.
There can be no two views on that this country should never place itself in the position in which it found itself in 1966 and 1967, at least partly as a result of the policy of depending on PL 480 supplies and to that extent of not allocating the necessary resources to agriculture. But since the United States is no longer landed with food surpluses which it cannot sell at remunerative prices to reasonably well-off countries like the Soviet Union, it has no vested interest today in encouraging dependence on it. Indeed, in recent years it had left the world community in no doubt that food aid to developing countries in need of it must be financed by all rich nations, including members of the OPEC.
If anything, the stand taken by several key figures in Washington in this regard has been even tougher than the one adopted by Mr Kissinger at the FAO’s conference in Rome in 1974 when he held out little hope for needy countries.
Domination
Along with the end of the US domination of the non-communist world’s economy and the aid scene, several other significant changes have taken place in recent years. Therefore instead of continuing to react in the old way as if nothing has happened to warrant a different response on their part, the critics of the current Indian policy of seeking and receiving aid should take note of these changes and then present their case, if they can, against acceptance of external aid. They have not done anything like that so far.
First, the developing countries have emerged as a group which is capable of demanding assistance on concessional terms from the rich industrialised nations as a matter of right. They have not secured what they have been pressing for – the transfer of one per cent of their GNP by the rich countries to the poor ones, 7 per cent of it on a state-to-state basis on highly concessional terms – but they have gradually persuaded donor governments to soften the terms of assistance and made it virtually impossible for them to use aid as an instrument of influencing the political or economic policies of the aid-receiving nations.
Secondly, following the five-fold rise in the prices of crude since 1973, oil-exporting countries like Saudi Arabia, Kuwait, the UAE, Iran and Iraq have become major financial powers. They have an obligation to help other members of the third world overcome the burden that their own decision to raise oil prices has imposed on them, in India’s case, the moral obligation is supplemented by the fact that it is in a position to make good use of aid and in its turn provide the oil-rich neighbouring countries not only with a vast variety of products but also with expertise and trained personnel in a variety of fields. The growing co-operation between India and Iran or between India and Iraq provide excellent indicators to what is possible, and the process has just begun.
Thirdly, the communist countries headed by the Soviet Union have felt compelled to give up the concept of autarky in the economic field both as individual nations and as a group and to develop as rapidly as possible trade and other links with the West in order to modernise their economies, fulfil the expectations of their people and make their products competitive in the world markets. In plain terms, they have found that industrialisation is not a one-shot affair and that they need constant interaction with the more developed West and Japan if they are not to fall behind in the technological race. They have also found that they need substantial credits year after year to be in a position to import their urgent requirements.
As the debate in China in recent years bears out, not all the leaders even in Peking are impervious to this harsh reality. On the contrary, many of them are known to favour wider links with the industrialised West and Japan and the import of technology on a substantial scale. Unlike the Soviet leaders, the Chinese modernisers popularly known as the moderates, still do not seek external credits, not to speak of inviting multinational corporations to their country. But who could believe in the ‘fifties that the Soviet Union would be seeking and receiving billions of dollars as credit from western governments and banks?
The argument is not that India should base its plans of economic development on external assistance. It cannot do so even if it so desires and does all it can to get credits. For, assistance on the kind of scale it needs is neither available nor is it likely to be available in the foreseeable future. The argument is that the old case against foreign assistance has ceased to be valid.
Growth
In other respects, too, economic growth is a highly complex affair which just does not admit of a static and doctrinaire approach. For instance, import substitution may be a valid strategy in one period and not in another. Similarly, the setting up of capital intensive plants may be justified in one field and not in another. Financial controls need to be tightened and relaxed in accordance with the exigencies of the situation. And who does not know that stable prices cannot be an end in themselves? They are helpful to the extent that they make for a rapid rate of growth. Otherwise, while they are likely to benefit the fixed income groups, they are apt to penalise the unemployed by slowing down the expansion of industry and reducing the opportunities for gainful employment.
The Times of India, 29 September 1976