During the tenure of the National Democratic Alliance Government, a decision was taken to forego bilateral assistance from several countries. At that time the idea was received with scepticism by many. But the burgeoning foreign exchange reserves justified that decision and it also facilitated larger benefits to some of the poorer countries.
First, taking advantage of our comfortable forex reserves and lower domestic interest rates, the Government effected premature repayment of `high-cost' currency pool loans of the World Bank, and of the Asian Development Bank totalling around $3 billion. The then Finance Minister, Mr Jaswant Singh, initiated the following steps in the light of the above. The Government decided to (i) discontinue receiving aid from other countries except the following nine: Japan, the UK, Germany, the US, the EU, France, Italy, Canada and the Russian Federation and (ii) to make pre-payment of all bilateral debt owed to all countries except the ones mentioned above.
Since July 2003, India has become a net creditor to the IMF, after having been a borrower in the past. The Government has written off debt worth $30 million due to it from seven heavily indebted countries as part of the "India Development Initiative" announced in February 2003. The interest rate continues to be reduced and is around 6 per cent. This is the lowest in the last 30 years and it is stimulating consumption and investment.
There was a time in the 1980s when India needed to get forex loans and support for rupee expenditure. But with its burgeoning forex reserves it need not be constrained by the amount it gets from the donors.
After all, self-help is still a good principle that can be practiced particularly when the country is aiming for two-digit growth rates and currently holding (week ended June 16) more than $160 billion as foreign exchange reserves.
There are other important issues linked with India's continued dependence on World Bank aid. That is related to its ambition to be considered a world power.
It is interested in being included as a member of groupings such as G-8, etc., and this implies that India cannot be a recipient of aid from the others who are sitting at the same table. World powers would prefer equals, and not supplicants, in their midst.
blonnet
