Trend and patterns of Indian Aid in Nepal (FY1990/91-FY2016/17)

Abstract

Foreign aid can be defined as economic aid from one country to another, the beneficiary typically being a less developed country (LDC). Foreign aid is required for the economic development and growth of the country. Lack of enough capital formation in the country is the main problem for economic development of the underdeveloped country. The developed countries have been providing assistance to the less development countries by providing aid through various medium and agencies. The study is related to the analysis of trend and pattern of Indian in Nepal (19902016).

The study shows that Indian aid to Nepal during 1990-2016 is Rs.133843 millions. The India aid occupied 8.19% of the total aid in Nepal. Likewise, Indian aid has covered an average of 0.35% in the total GDP of Nepal. The total Indian grants reached cumulative Rs.64255.21 millions and the total Indian aid loan reached cumulative Rs.61758.78 millions in the 17 years period from 2000-2016. The volume of Indian aid to Nepal is rising taking a pattern of decreasing and increasing through out the study period. The study tries to explain the Indian aid commitment and disbursement situation in Nepal. The Indian aid commitment reached Rs. 130137.22 millions and the Indian aid disbursement reached Rs. 62632.00 millions. The disbursed Indian amount is only 48.12% of the total aid commitment. India has been providing aids in the various sectors of Nepal. In the past, Indian aid was concentrated in transportation, education and health sectors but nowadays the Indian aid has been diversified on reconstruction, local development occupies, energy and drinking water, communication , electricity etc. From this, we can see that the contribution of the Indian aid to Nepal is vital for the economic development of the country. The study tries to see the impact of Indian aid on the GDP of Nepal. The impact of Indian aid on GDP is found to be positive and significant. Using regression analysis, we found that there is positive correlation between Indian aid and GDP. The value of R 2 is 0.265 implying that predictor Indian aid accounts 26.5% variation in the total GDP. The slope of Indian aid is 21.194 which imply that when Indian aid inflow v increase by 1 million, GDP increases by 21.194 millions. Similarly, Indian aid grants and loans are also positive and significant in impacting the GDP of Nepal. There is positive correlation between Indian aid grants and GDP. The value of R vi 2 is 0.271 implying that predictor Indian aid accounts 27.1% variation in the total GDP. The slope of Indian aid is 45.073 which imply that when Indian aid grants in flow increase by 1 million, GDP increases by 45.073 millions. Likewise, there is positive correlation between Indian aid loan and GDP. The value of R 2 is 0.269 implying that predictor Indian aid accounts 26.9% variation in the total GDP. The slope of Indian aid is 40.082 which imply that when Indian aid grants inflow increase by 1 million, GDP increases by 40.082 millions. The history of foreign aid to Nepal shows that the donors of Nepal have been implicitly expressing and lobbying their political and economic motives to the GoN. The GoN should be careful while accepting foreign aid. The GoN should always accept foreign aid as per the needs and national priorities. There should be better utilization of foreign aid because aid today adds liability to the future generation.