India’s approach to development cooperation is conceptualized in the available literature as following the idea of ‘development compact’. The present article situates development compact in the theoretical discourse on development economics. In a comparative setting, it argues that while North–South Cooperation, in terms of its different modalities and institutional structure, aims at reducing the negative externalities arising out of exchange of resources for development between the donor and recipient, development compact in the spirit of South–South Cooperation, aims to capture and enlarge the potential of generating positive externalities through horizontal development cooperation.
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