ABSTRACT
Foreign aid is in trouble in the United States and in other donor countries as well. The most difficult problems from the standpoint of aid policy are represented by India and Pakistan, especially the former. Development economists frequently begin with the caveat that no amount of external capital will guarantee successful development, and then proceed to construct growth models in which the amount of capital inflow is the principal independent variable. As a general proposition, external capital or aid is neither a necessary nor a sufficient condition for development. Capital inflow may take a variety of forms and be provided by various public and private sources. The question of aid allocation faced by any one of the major foreign-assistance agencies is partly political and administrative, only partially economic. The most urgent need is for coordination of foreign-assistance activities in countries receiving concessionary aid designed to facilitate structural change required for sustained progress.
