ABSTRACT
Net aid to India, by 1985-6, was only 0.8 per cent of GDP. However, project aid matters much more than this suggests. As the Appendix to this chapter shows (pp. 204-6), in India (unlike most other LICs): (i) the role of foreign capital is best assessed by the ratio of gross aid to public development investment (21 per cent in 1985-6) or to imports (11 per cent); (ii) a large, growing part of aid is project-linked; (iii) its relatively hard terms (tied loans rather than grants) mean that project returns must at least raise GNP enough to cover loan repayments; and (iv) heavy concentration of aid on key sectors, past (steel) and present (irrigation), further increases the importance of good project performance.
