Political Economy of External Aid for Education in India

  • Jandhyala B. G. Tilak


Following the structural adjustment policies introduced in India in the beginning of the 1990s, a social safety net programme was launched in India, primarily aiming at protecting the sectors of primary education and primary health care. The chapter presents a critical review of the politico-economic dynamics of the business of aid for education in India, and in the process reviews the rationale for aid for education and its impact. It unravels quite a few important dimensions of the external aid business from which valuable lessons can be drawn for India and other developing countries.


Foreign aid Education World bank DPEP Conditionalities Grants, loans, political economy 



Revised version of the Sri C.V. Subba Rao Memorial Lecture 2006, delivered at the 24th Annual Conference of the Andhra Pradesh Economic Association, Maris Stella College, Vijayawada, India (11–12 March 2006). The opinions expressed in the paper are those of the author and are not to be attributed to the Institution with which he is associated, or to the Andhra Pradesh Economic Association. The comments of K.C. Reddy and the other participants of the conference and of the anonymous referees of the journal are gratefully acknowledged.


  1. Adams, J., 1990. Breaking Away: India’s Economy Vaults into the 1990s. In India Briefing 1990, ed. M.M. Button and P. Oldenburg, 77–100. Boulder: Westview Press and the Asia Society.Google Scholar
  2. Addison, T., G. Mavrotas, and M. McGillivray. 2005. Development Assistance and Development Finance: Evidence and Global Policy Agendas. Journal of International Development 17 (6): 819–836.CrossRefGoogle Scholar
  3. Asiedu, E., and B. Nandwa. 2007. On the Impact of Foreign Aid in Education on Growth: How Relevant Is the Heterogeneity of Aid Flows and the Heterogeneity of Aid Recipients? Review of World Economics (formerly Weltwirtschaftliches Archiv) 143 (4): 631–649.CrossRefGoogle Scholar
  4. Ayyar, R.V.V. 2005. What Lessons Can DPEP Offer? Journal of Educational Planning and Administration 19 (1): 49–65.Google Scholar
  5. Basu, M. 2006. Negotiating Aid: World Bank and Primary Education in India. Contemporary Education Dialogue 3 (2): 133–154.CrossRefGoogle Scholar
  6. Boone, P. 1996. Politics and the Effectiveness of Foreign Aid. European Economic Review 40: 289–329.CrossRefGoogle Scholar
  7. Bordia, A. 2000. Education for Gender Equity: The Lok Jumbish Experience. Prospects 30 (3): 313–329.CrossRefGoogle Scholar
  8. Boyce, J.K. 2002. Unpacking Aid. Development and Change 32 (2): 239–246.CrossRefGoogle Scholar
  9. Caufield, C. 1997. Masters of Illusion: The World Bank and the Poverty of Nations. London: Pan Books.Google Scholar
  10. Chatterjee, S., P. Giuliano, and I. Kaya. 2007. Where Has All the Money Gone? Foreign Aid and the Quest for Growth. IZA Discussion Paper 2858, Institute for the Study of Labor, Bonn.Google Scholar
  11. Collier, P., and D. Dollar. 2004. Development Effectiveness: What Have We Learnt? Economic Journal 114 (496): F244–F271.CrossRefGoogle Scholar
  12. de Renzio, P. 2006. Aid, Budgets and Accountability: A Survey Article. Development Policy Review 24 (6): 627–646.CrossRefGoogle Scholar
  13. Devarajan, S., and V. Swaroop. 1998. The Implications of Foreign aid Fungibility for Development Assistance. Washington, DC: World Bank, PPR 2022.Google Scholar
  14. Dijkstra, A.G. 2002. The Effectiveness of Policy Conditionality: Eight Country Experiences. Development and Change 32 (2): 307–334.CrossRefGoogle Scholar
  15. Easterly, W. 2003. Can Foreign Aid Buy Growth? Journal of Economic Perspectives 17 (3): 23–48.CrossRefGoogle Scholar
  16. Edgren, G. 2002. Aid Is an Unreliable Joystick. Development and Change 33 (2): 261–267.CrossRefGoogle Scholar
  17. Government of India. 1993a. Education for All: The Indian Scene. New Delhi: Ministry of Human Resource Development.Google Scholar
  18. Government of India. 1993b. District Primary Education Project. New Delhi: Ministry of Human Resource Development.Google Scholar
  19. Government of India. 1995. DPEP Guidelines. New Delhi: Ministry of Human Resource Development.Google Scholar
  20. Government of India. 2005. Economic Survey 2004–05. New Delhi: Ministry of Finance.Google Scholar
  21. Griffin, K.L., and J.L. Enos. 1970. Foreign Assistance: Objectives and Consequences. Economic Development and Cultural Change 18 (April): 313–337.CrossRefGoogle Scholar
  22. Hayter, T. 1971. Aid as Imperialism. Harmondsworth: Penguin Books.Google Scholar
  23. Hayter, T. 1985. Aid: Rhetoric and Reality. London: Pluto.Google Scholar
  24. Heller, P.S. 1975. A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment and Taxation. American Economic Review 65 (June): 429–445.Google Scholar
  25. Jagannathan, S., and M. Karikorpi. 2000. EC–India Collaboration in Primary Education: Sector-Wide Approaches to Development Cooperation. Prospects 30 (4): 409–422.CrossRefGoogle Scholar
  26. Jones, P.W. 1992. World Bank Financing of Education: Lending, Learning and Development, 2nd ed., 2007. London: Routledge.Google Scholar
  27. Kakwani, N. 1995. Structural Adjustment and Performance in Living Standards in Developing Countries. Development and Change 26 (3): 469–502.CrossRefGoogle Scholar
  28. Kakwani, N., E. Makonnen, and J. van der Gaag. 1990. Structural Adjustment and Living Conditions in Developing Countries. PRE Working Paper No. WPS 467, World Bank, Washington, DC.Google Scholar
  29. King, K. 1991. Aid and Education in the Developing World: The Role of the Donor Agencies in Educational Analysis. Harlow: Longman.Google Scholar
  30. Kraske, J., et al. 1996. Bankers with a Mission: The Presidents of the World Bank 1946–1991. New York: Oxford University Press for the World Bank.Google Scholar
  31. Laxer, J. 1993. False God: How the Globalisation Myth Has Impoverished Canada. Toronto: Lester.Google Scholar
  32. Lumsdaine, D.H. 1993. Moral Vision in International Politics: The Foreign Aid Regime 1949–1989. Princeton, NJ: Princeton University Press.Google Scholar
  33. Magdoff, H. 1969. The Age of Imperialism. New York: Monthly Review Press.Google Scholar
  34. Mason, E.S., and R.E. Washer. 1973. The World Bank Since Bretton Woods. Washington, DC: Brookings Institution.Google Scholar
  35. Masud, N., and B. Yontcheva. 2005. Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid. IMF Working Paper No. WP/05/100, International Monetary Fund, Washington, DC.Google Scholar
  36. Mavrotas, G. 2002. Aid and Growth in India: Some Evidence from Disaggregated Aid Data. South Asian Economic Journal 3 (1): 19–48.CrossRefGoogle Scholar
  37. MHRD-a (Ministry of Human Resource Development). 1995. Budgetary Resources for Education 1951–52 to 1993–94. New Delhi: Government of India, Department of Education.Google Scholar
  38. MHRD-b. Various years. Analysis of Budgeted Expenditure on Education. New Delhi: Government of India, Department of Education.Google Scholar
  39. MOF (Ministry of Finance). 2006. Expenditure Budget 2007–08. New Delhi: Government of India.Google Scholar
  40. MOF. 2007. Expenditure Budget 2007–08. New Delhi: Government of India.Google Scholar
  41. Mosely, P. 1987. Foreign Aid: Its Defense and Reform. Lexington: University of Kentucky Press.Google Scholar
  42. Mosley, P., J. Harringan, and J. Toye. 1991. Aid and Power: The World Bank and Policy-Based Lending. London: Routledge.Google Scholar
  43. Opeskin, B.R. 1996. The Moral Foundations of Foreign Aid. World Development 24 (1): 21–44.CrossRefGoogle Scholar
  44. Petras, J., and H. Veltmeyer. 2002. Age of Reverse Aid: Neo-liberalism as Catalyst of Regression. Development and Change 32 (2): 281–293.CrossRefGoogle Scholar
  45. Pronk, J.P. 2001. Aid as a Catalyst. Development and Change 32 (4): 611–629.CrossRefGoogle Scholar
  46. Psacharopoulos, G. 1973. Returns to Education: An International Comparison. Amsterdam: Elsevier.Google Scholar
  47. Psacharopoulos, G. 1984. Contribution of Education to Economic Growth: International Comparisons. In International Comparisons of Productivity and Causes of the Slow-Down, ed. J.W. Kendrick, 335–360. Cambridge: American Enterprise Institute/Ballinger.Google Scholar
  48. Psacharopoulos, G., and H.A. Patrinos. 2004. Human Capital and Rates of Return. In International Handbook of Economics of Education, ed. G. Jones and J. Jones, 1–57. Cheltenham: Edward Elgar.Google Scholar
  49. Reddy, D.N. 1994. Double Standards of World Bank’s Policy Package: Accentuation of Dualism and Inequity in Education. New Frontiers in Education 28 (4): 369–383.Google Scholar
  50. Rosen, G. 1991. The Indian Economy: Muddling Through in a Year of Turmoil. In India Briefing 1991, ed. P. Oldenburg, 75–95. Boulder: Westview Press.Google Scholar
  51. Sachs, Jeffery D. 2005. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin Press.Google Scholar
  52. Sachs, J. 2006. Foreign Aid Is in Everyone’s Interest, Christian Science Monitor, 10 May. Reproduced from Los Angeles Times. Available from
  53. Sadgopal, A. 2004. Globalisation: Demystifying Its Knowledge Agenda for India’s Education Policy. Durgabhai Deshmukh Memorial Lecture. New Delhi: Council for Social Development and India International Centre.Google Scholar
  54. Schultz, T.W. 1961. Investment in Human Capital. American Economic Review 51 (1): 1–15.Google Scholar
  55. Schultz, T.W. 1981. Distortions by the International Donor Community. In Investing in People: The Economics of Population Quality, ed. T.W. Schultz, 122–147. Delhi: Hindustan.Google Scholar
  56. Swaroop, V., S. Jain, and A.S. Rajkumar. 2000. Fiscal Effects of Foreign Aid in a Federal System of Governance: The Case of India. Journal of Public Economics 77: 307–330.CrossRefGoogle Scholar
  57. Tarp, F., and P. Hjertholm. 2000. Foreign Aid to Development: Lessons Learned and Directions for the Future. London: Routledge.Google Scholar
  58. Thobani, M., 1983. Charging User Fees for Social Services: The Case of Education in Malawi. Staff Working Paper No. 572, World Bank, Washington, DC.Google Scholar
  59. Tilak, J.B.G. 1987. Economics of Inequality in Education. New Delhi: Sage.Google Scholar
  60. Tilak, J.B.G. 1988. Foreign Aid for Education. International Review of Education 34 (3): 313–335.CrossRefGoogle Scholar
  61. Tilak, J.B.G. 1989. Center–State Relations in Financing Education in India. Comparative Educational Review 33 (4): 450–480.Google Scholar
  62. Tilak, J.B.G. 1990. External Debt and Public Investment in Education in Sub-Saharan Africa. Journal of Education Finance 15 (4): 470–486.Google Scholar
  63. Tilak, J.B.G. 1991. Privatization of Higher Education. Prospects: Quarterly Review of Education (UNESCO) 21 (2): 227–239.CrossRefGoogle Scholar
  64. Tilak, J.B.G. 1992. Education and Structural Adjustment. Prospects: Quarterly Review of Education (UNESCO) 22 (4): 407–422.CrossRefGoogle Scholar
  65. Tilak, J.B.G. 1994. External Financing of Education: A Review Article. Journal of Educational Planning and Administration 8 (1): 81–86.Google Scholar
  66. Tilak, J.B.G. 1996a. Higher Education Under Structural Adjustment. Journal of Indian School of Political Economy 8 (2): 266–293.Google Scholar
  67. Tilak, J.B.G. 1996b. How Free is ‘Free’ Primary Education in India? Economic and Political Weekly 31 (5/6): 275–282, 355–366.Google Scholar
  68. Tilak, J.B.G. 1999a. National Human Development Imitative: Education in the Union Budget. Economic and Political Weekly 34 (10/11): 614–620.Google Scholar
  69. Tilak, J.B.G. 1999b. Development Assistance to Primary Education in India: Transformation of Enthusiastic Donors and Reluctant Recipients. In Changing International Aid to Education: Global Patterns and National Contexts, ed. K. King and L. Buchert, 307–317. UNESCO with NORRAG.Google Scholar
  70. Tilak, J.B.G. 2000. Education Poverty in India. NIEPA Occasional Paper No. 29, National Institute of Educational Planning and Administration, New Delhi (May).Google Scholar
  71. Tilak, J.B.G. 2002. Financing Elementary Education in India. In India Education Report: A Profile of Basic Education, ed. R. Govinda, 267–294. New Delhi: Oxford University Press for National Institute of Educational Planning and Administration.Google Scholar
  72. Tilak, J.B.G. 2003. A Decade of Turmoil in Higher Education in India: Faulty Assumptions, Questionable Approaches, and Undesirable Outcomes. Higher Education Policy and Practices 1 (1/2): 25–31.Google Scholar
  73. Tilak, J.B.G. 2004. Absence of Policy and Perspective in Higher Education. Economic and Political Weekly 39 (21): 2159–2164.Google Scholar
  74. Tilak, J.B.G. 2006. Cess-driven Allocations for Education. Economic and Political Weekly 41 (14): 1331–1333.Google Scholar
  75. Triantis, S.G. 1962. Foreign Aid: Unrestricted or Conditional? Economic Development and Cultural Change 11 (1): 101–104.CrossRefGoogle Scholar
  76. UNESCO. 2002. Education for All: Is the World on Track? EFA Global Monitoring Report 2002. Paris.Google Scholar
  77. UNESCO. 2006. Education for All: Early Childhood Care and Education (EFA Global Monitoring Report 2007). Paris.Google Scholar
  78. Varghese, N.V. 1994. District Primary Education Programme: The Logic and the Logistics. Journal of Educational Planning and Administration 8 (4): 449–455.Google Scholar
  79. Varghese, N.V. 1996. Decentralisation of Educational Planning in India: The Case of the District Primary Education Programme. International Journal of Educational Development 16 (4): 355–365.CrossRefGoogle Scholar
  80. Varghese, N.V. 1998. Investment in Education and Implications for Poverty Reduction in India: A Study of Primary Education Projects Funded by the European Countries. Occasional Paper No. 25, National Institute of Educational Planning and Administration, New Delhi.Google Scholar
  81. Verspoor, A. 1993. More than Business-As-Usual: Reflections on the New Modalities of Education Aid. International Journal of Educational Development 13 (2): 103–112.CrossRefGoogle Scholar
  82. WCEFA (World Conference on Education for All). 1990. World Declaration on Education for All. New York.Google Scholar
  83. Weiler, H.W. 1984. Political Economy of International Cooperation in Education Development. In Education and Development, ed. R.M. Garrett, 123–156. London: Croom Helm.Google Scholar
  84. Weiskopf, T.E. 1972. The Impact of Foreign Capital Inflow on Domestic Savings in Underdeveloped Countries. Journal of International Economics 2 (February): 25–38.CrossRefGoogle Scholar
  85. World Bank. 1980. Education Sector Working Paper, Washington, DC.Google Scholar
  86. World Bank. 1986. Financing Education in Developing Countries: An Exploration of Policy Options. Washington, DC.Google Scholar
  87. World Bank. 1990. Primary Education: A World Bank Policy Paper. Washington, DC.Google Scholar
  88. World Bank. 1994. District Primary Education Programme: Staff Appraisal Report (India). Washington, DC.Google Scholar
  89. World Bank. 1995. Priorities and Strategies for Education: A World Bank Review. Washington, DC.Google Scholar
  90. World Bank. 1997. Primary Education in India. Washington, DC.Google Scholar
  91. World Bank. 1998. Assessing Aid: What Works, What Doesn’t and Why. A World Bank Policy Research Report. New York: Oxford University Press.Google Scholar
  92. World Bank. 2001. India: The Challenges of Development: A Country Assistance Evaluation. Washington, DC.Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Jandhyala B. G. Tilak
    • 1
  1. 1.New DelhiIndia

Personalised recommendations