Special Correspondent

Ours is not an aid-dependent country, but no harm in using foreign aid: Chidambaram

External assistance plays major role in development processStreamline aid to NGOs: members

New Delhi: Finance Minister P. Chidambaram on Tuesday ruled out India accepting "tied aid" or any external aid with binding conditions.

While stressing that it was not an aid-dependent country, he said there was no harm in utilising aid as it provided access to improved technology and acted as a disciplining factor.

Addressing the Parliamentary Consultative Committee attached to his Ministry here, Mr. Chidambaram said external assistance played a major role in the development process. It was a significant source for financing major infrastructure projects, social sector schemes and building up institutional capacity. Out of the 434 ongoing externally assisted projects, 226 were being implemented in the State sector and the rest were either multi-State or Central sector projects.

According to informed sources, some members including Bimal Jalan suggested that the Centre play less of a regulatory role and more of facilitator while passing on such funds to the States. Others such as Ravi Shankar Prasad proposed that a strategy paper be prepared to outline the government's priorities for utilisation of external assistance.

Skewed distribution

Some members pointed to a skewed distribution of external aid with States like Bihar getting only one project and others such as Andhra Pradesh being given 28 projects.

The other suggestions made by members included streamlining assistance to non-governmental organisations, making aid more liberal to the social sector, NGOs and the agricultural sector at concessional rates, monitoring of and feedback on efficient utilisation of external assistance and special consideration for debt-stressed and special category States.

According to an official release, the Minister said the 12th Finance Commission recommendation that external assistance be passed on on the same terms and conditions on which it was received was accepted. Accordingly, for new projects signed on or after April 1, 2005, external assistance would be passed on a `back-to-back' basis.

Mr. Chidambaram urged the States to design good projects and present them in a manner convincing to the donors. He said the government issued the revised guidelines on October 24 last providing for an analysis of debt sustainability of the States for availing themselves of external assistance for development and structural adjustment purposes.

External assistance made available by multilateral and bilateral sources comprised loans, technical assistance and grants. In 2005-06 India received Rs. 18,464.51 crore, consisting of Rs. 12,416.54 crore from multilateral agencies, which is 67 per cent of total aid. This includes Rs. 9,561.29 crore from the World Bank and Rs. 2,645.35 crore from the Asian Development Bank. India did not have to avail itself of IMF loans for more than a decade now.

The significant bilateral sources included Japan, Germany and the United Kingdom. In 2005-06, Rs. 6,047.97 crore, which is 33 per cent of the total aid, was received from bilateral agencies. This includes Rs. 2,453.83 crore from Japan and Rs. 1,371.49 crore from the U.K.

Among the members who participated are R. Prabhu, K.V. Thangkabalu, Jivabhai A. Patel, Prahlad Joshi, Vijaya Kumar Khandelwal, Angadi Suresh Chanabasappa, Pusp Jain, Mohammad Salim, Tukaram G. Gadakh, P.C. Thomas, Gireesh Kumar Sanghi, Harendra Singh Malik, A. Vijayaraghavan, Lalit Suri, Abani Roy, Arun Shourie, Dinesh Trivedi and Mahendra Prasad.