External assistance
Topic: Balance of Payments and Exchange Rates · NCERT: Class 12, Ch 6 "Open Economy Macroeconomics"
Meaning
External assistance is aid and concessional loans a country receives from abroad, usually from foreign governments and multilateral bodies. "Concessional" means softer terms than the market offers: lower interest or longer repayment periods. It is a capital account item. Net external assistance equals inflows received minus repayments made.
Example
In NCERT's Table 6.1, net external assistance is US$0.15 million. This is a small item next to foreign investment (US$19 million) and banking capital (US$15 million).
Don't confuse with
- External commercial borrowings (ECB): these are loans raised from non-residents on market terms, such as bank loans and bonds, under RBI rules. External assistance comes on concessional terms.
Related concepts
- Capital account
- BPM6
- Capital flows
- Foreign Direct Investment
- Foreign portfolio investment
- Greenfield and brownfield investment
- Automatic route and government route
- Overseas direct investment
- Round-tripping
- External commercial borrowings