Abstract: Since early nineties when ‘East Asian miracle’ aroused heated debate
among revisionists and neoclassical economists on economic development
and the role of state, two different approaches have emerged in the realm
of development cooperation. In one the community participation is seen in
commanding position to “create” social capital while the other assign this role
to a more “powerful” State. India’s development programme in Nepal exhibits
features that are common to both of these positions. In this paper, we evaluate
the impact and potential of these development programmes known as Small
Development Projects (SDPs), introduced by India as part of its development
cooperation portfolio in Nepal. Through a set of case studies and analytical
tools, we find that India’s experience of SDPs in Nepal involved wide variety
of stakeholders, namely, communities and their groups, local authorities from
administration and governments from Nepal and India. We show that the
positive externalities enjoyed by Nepal are a result of a complex interaction
among these stakeholders as explained by the process through which the
projects are delivered.