Forms of aid:bilateral (government to government) and multilateral (through international organisations such as the World Bank, UN agencies); grants (no repayment) and soft (concessional) loans (below-market interest, long repayment periods); tied aid (must be spent on goods and services from the donor country) and untied aid; project aid (dams, roads) and programme/budget support; technical assistance (expertise, training); humanitarian/emergency aid (disasters); aid from NGOs (charities).
Reasons for giving aid: humanitarian and moral obligation; to fill the savings gap and foreign exchange gap (Harrod–Domar); to promote development and reduce poverty; political and strategic influence; commercial benefits for donors (tied aid creates export demand); historical (colonial) ties; global public goods (health, climate). India is both a recipient (historically) and a growing donor (aid to Nepal, Bhutan, African countries).
Effects and importance of aid:positive: finances infrastructure, health, education; transfers technology and skills; supports the balance of payments; emergency relief saves lives. Negative: dependency; corruption and misuse; tied aid raises costs and may not fit needs; loans add to debt; Dutch-disease effects (aid inflows appreciate the currency); may undermine local producers (food aid); donor priorities may not match recipient needs. Its importance varies: for some low-income countries aid is a large share of GNI; for India it is now very small.
🔒 Also in the full notes
11.5.2 Trade and investment
11.5.3 Multinational companies (MNCs)
11.5.4 Foreign direct investment (FDI)
11.5.5 External debt
11.5.6 The role of the International Monetary Fund (IMF) and the World Bank
Exam practice: 4 practice questions
3 exemplar 20-mark essays with full model answers, mark breakdowns and common mistakes