Environment and sustainable development have recently risen to the top of international political agenda. The Third World countries are being asked by the developed countries to conserve their natural resources and halt the deterioration of environment. At the same time the International Monetary Fund and the World Bank are imposing upon the Third World countries including India structural adjustment policies (SAPs) to promote economic growth. Removal of barriers to foreign trade and provision of incentives to attract foreign capital are two of the major elements of the SAPs. This paper explores the likely impacts of free foreign trade and foreign aid on sustainable development with special reference to India. The author concludes that both free foreign trade and foreign aid are not necessarily going to promote sustainable development defined as sustainable livelihood for everybody, especially the poor. On the contrary, they may speed up the pace of natural resources depletion and environmental degradation.