Foreign aid has lost its shine and power : economic times
Foreign aid has always been controversial because it marries economic assistance with political purpose. The nature of aid has, thus, been shifting with the polarity in geopolitics and the spread of development to the point where the developing world is now able to help itself reach its ‘own’ milestones. True, much of the developing world will be trapped in a middle-income zone at the end of a process of accelerated development, but it will be a fair bargain to have accomplished it through self-determination. The clock cannot be set back to the ideologically influenced international assistance of the US and the Soviet Union during the Cold War in the 1970s, the commercial compulsions of market liberalisation driven by the Washington Consensus in the 1990s, or even to the more recent strategic lending by China in the 2010s.
Donald Trump has publicly acknowledged the shrinking relevance of developed-world aid through US isolationism. The developing world, or the ‘global south’, has overtaken the advanced economies in terms of world economic output and is exporting capital. The need for aid is on a declining trajectory as development issues dwindle to manageable proportions. Principally, however, the developing world has created its own solutions. MIT’s poverty lab is an interesting endeavour. So is Bangladesh’s microcredit. The developing world has come up with its own medicine and is administering it well enough.
Aid as an instrument of state policy entered a terminal decline when international private capital overtook official flows. There are no democratic or capitalist buttons left to press by offering to build schools halfway across the world. Development yardsticks have been codified multilaterally, and there is little scope left for bilateral nudging. The West has been cashing in on its diminishing pile of overseas aid chips to pay for things like security and sustainability. The ‘global south’ will step up to take care of the humanitarian needs of its own.
Diversify now: On India and looming economic risks : the hindu
February’s sharp rise in the monthly services Purchasing Managers’ Index (PMI), to 59, has provided a welcome relief to investors and policymakers, following the rise in GDP growth numbers, released by the National Statistical Office (NSO) for the December quarter of the current fiscal (Q3FY25). The strong rebound in the services PMI, up from 56.5 in January, which marked a 25-month low, helped offset the decline in the manufacturing PMI, which fell to a 14-month low of 56.3 in February. A PMI reading above 50 signals expansion, while anything below this indicates contraction. The PMI survey, conducted every month by S&P Global across over 40 countries, is a key indicator of economic momentum. The fact that manufacturing and services — sectors that have accounted for about 80% of India’s GDP since 2010 — remain in expansion mode is positive. This resilience persists despite capital outflows from Indian markets, suggesting that the country’s economic fundamentals remain strong. A more telling indicator of long-term economic strength is the quarterly earnings of the Sensex, India’s benchmark index comprising 30 of the most valued and actively traded companies on the Bombay Stock Exchange (BSE). The Q3FY25 results point to solid net profit growth for nearly all firms.
However, looming economic risks remain. The threat of reciprocal tariffs announced by United States President Donald Trump, and set to take effect on April 2, poses a challenge for the manufacturing sector. Meanwhile, the services sector is facing a different disruption: the rapid pivot to artificial intelligence (AI)-driven solutions. While the NSO reported 6.2% real GDP growth for Q3FY25, top executives from India’s leading IT firms have, at an industry event in Mumbai, cautioned that growth in the sector could be as low as 5.1% in FY25, up from 3.8% in FY24. Although this may seem concerning for an industry that has enjoyed a 16% compounded annual growth rate for nearly 25 years, it still represents an increase of $29 billion, bringing the sector’s expected value to $283 billion in FY25. In its 2025 Strategic Review report, NASSCOM has identified geopolitical upheavals and rising tariffs as key challenges. But business leaders at the event attributed much of the slowdown to the disruptive impact of AI, which is reducing earnings from new contracts and reshaping hiring and training practices. India’s services and manufacturing sectors face a triple challenge: rapid technological transformation, increasing global protectionism, and the potential for a U.S. recession. This could have significant repercussions for India, given that the U.S. remains its largest trading partner. To navigate these headwinds, India must urgently diversify its trading base.