External Assistance: Terms and Conditions of Transfer to States

• Completion date जनवरी., 2000
• Sponsor Ministry of Finance
• Project leader D.K. Srivastava
• Other faculty C. Bhujanga Rao
• Focus

  The study examines the implications of the mechanism of transmission of external assistance to the states on terms and conditions different from the original terms and conditions. It quantifies the gains or losses between the centre and the states in the process of transmission of external assistance as Additional Central Assistance (ACA) on the terms and conditions of plan assistance. Further, it argues that instead of the present system, external assistance should be transmitted to the states on the original terms and conditions envisaged by the creditors except for one single modification. In particular, grants should be transmitted as grants and loans should be transmitted on all the original terms like grace period and maturity period, but the rate of interest should comprise two elements: the interest rate in foreign currency terms and anticipated depreciation rate. This would cover the exchange risk for the states as well as the centre. It would also expose the states to the true costs of external assistance.