Publication Date


Document Type


First Advisor

Kreidle, John R.

Degree Name

M.S. (Master of Science)

Legacy Department

Department of Finance


Economic assistance; American--India; Economic assistance; Soviet--India; India--Economic policy


The Directive Principles of the Constitution of India state that the government shall direct its policy towards securing an adequate means of livelihood to the people and using the country's resources to subserve the common goal. The Fourth Five Year Plan also recognizes that the benefits of the economic development must accrue more and more to the relatively less privileged classes. The central objective of planning in India is therefore to initiate a process of development which will raise the standards of living of the people. The problem is one of effectively utilizing the potential resources available to the country. The execution of the plans requires resources, either domestic or foreign. Given the basic conditions of rapid and sustained progress, the key to higher productivity lies in stepping up the rate of capital formation. his formation, in turn, depends upon the saving and investments in the country. in a country. In a country like India, however, this formation, in turn, depends upon the saving and investments in the country. In a country like India, however, this is not enough because there is a tendency among the people to utilize a large part of the saving for unproductive purposes. All these factors result in inadequate domestic resources. A heavy reliance on foreign assistance therefore becomes an unavoidable necessity. The purpose of this study is to assess the impact of the American-Russian assistance on India's economic development. Starting from a mere $100 million in the early 1950s, India has been receiving foreign aid of nearly $900 million per annum since 1967. The debt servicing liabilities are imposing a tremendous burden on the country's resources, and there is a considerable debate in India regarding the advisability of continuing the aid. The impact of assistance is assessed on the country's agriculture, industry, and foreign trade. The study is essentially a library research project, and it has been conducted through the use of written materials available in the Library of Congress in Washington, D. C., Swen Franklin Parson Library at Northern Illinois University in DeKalb, and the Public Library in Chicago. The conclusions derived in the study are stated below. 1. The American aid has achieved its primary purpose--the sheltering of democracy in India. During the initial years of independence, when the country was facing an acute shortage of food, the danger of communist subversion was the greatest. The country was saved by the timely and massive food aid given by the United States under the P. L. 480 program. 2. During the years 1950-65, India's food production was rising at the rate of 2.5 percent per year, and the rise in population absorbed all the increase. The food production is now increasing at the rate of 5 percent per year, and the food imports under P. L. 480 have been stopped. 3. On the industrial side, while the United States has provided aid to improve the basic structure of the economy, the Russians have concentrated on building heavy steel plants and oil refineries. Russian aided projects now produce 30 percent of India's steel, 35 percent of India's oil, and 85 percent of India's heavy machinery. 4. The pattern of foreign trade has changed considerably in recent years, and new trading items are taking an important place in India's export structure. The trade with eastern European countries is also increasing rapidly. 5. India's total borrowings exceeded $18,000 million in 1971. The debt servicing charges account for nearly $500 million annually, and absorb nearly 30 percent of the country's export earnings. The country has therefore decided to stop all foreign aid during the Fifth Five Year Plan (1975-80). Meanwhile, the rescheduling of debt servicing payments appears to be the best way to meet the existing debt servicing burden. If an agreement can be reached, particularly with the United States, it would reduce India's payment requirements by rupees 1,000 million annually. A small reduction in imports can then be made to affect the balance of payments.


Includes bibliographical references.


v, 83 pages




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