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India’s trajectory from aid recipient to donor nation
EditorOlina Banerji documents India’s response to the announcement that the UK will no longer provide the country with financial aid.
On 9 November, the Minister of International Aid in the UK, Justine Greening, announced that all financial aid from the UK to India would cease with immediate effect, with the exception of programmes running on the ground, which are to be completed by 2015. Britain has overhauled its strategy vis-à-vis India to replace direct aid with “sharing expertise, supporting innovation and building skills.” The focus now will be on encouraging bilateral trade between the countries, given that India is the biggest overseas market for British goods.
The latest evidence of a restructured world order, the UK’s justification for withdrawing aid is based on India’s surging GDP over the last decade, its multi-million dollar space programme, and the fact that India itself is emerging as a donor nation. Meanwhile, India’s own development policy is focused on consolidating programmes through central schemes rather than pursuing fragmented efforts, which are often the direct beneficiaries of foreign aid.
Greening’s predecessor Andrew Mitchell had hinted at restructuring Britain’s India aid policy in late 2011, but cutting the chord was deemed premature at the time. Last month’s sudden shift in stance thus upset several left- liberal activists, who point to India’s bottom 30 per cent that lives in socio-economic conditions at par with, or even worse than, Sub-Saharan Africa. According to World Bank estimates, 456 million in India live on less than US$1.25 a day. Official reports state that 55 per cent of children in Bihar (a DfID focus area) are underweight and over a million are undernourished. Eight million have no access to education.
“Poor Indians deserve aid,” writes political analyst and human rights activist Praful Bidwai. “The rationale for official development aid (ODA) is based, among other things, on acknowledging and redressing the horrible injustice of colonial exploitation, which has continued in the form of … various restrictive trade practices imposed on the South, and in a skewing of its economic policies to favour free flow of global capital.”
Others argue that DfID’s continuing humanitarian support to the government and civil society groups will ultimately lead to cooperation at different levels. “Through its aid programme, DFID has also built strong partnerships in India and together we can work on issues of common interests such as a fairer trading system, climate change, more effective aid,” says Nisha Aggarwal, CEO, Oxfam India.
Historically, India has been the largest beneficiary of the UK’s aid programme, with an annual sanction of GBP 280 million targeted towards poverty reduction. DfID concentrated on three of the poorest regions in the country – Bihar, Madhya Pradesh, and Orissa – to carry out development projects in the areas of healthcare, sanitation, nutrition, and education. Despite the moderate success of these initiatives, there are few in the Indian government, including the president and the newly appointed Minister of External Affairs, Salman Khurshid, who will miss these “peanuts”. This aid accounts for a mere 0.04 per cent of India’s total GDP and is less than 2 per cent of what the government spends on food subsidies and rural alleviation programmes alone.
Government officials and development experts also point out that foreign aid is problematic because it comes with – in the words of Jayati Ghosh, professor of Economics at the Jawaharlal Nehru University – an ‘instruction manual’: an unrealistic expectation of what aid will achieve at the grassroots level and in terms of strategic influence over policymaking.
“By seeking foreign aid,” says Jamal Kidwai, Director, AMAN Trust, “the struggle against the government’s neoliberal agenda is distorted. Aid comes with conditions that assist transnational corporations. Additionally, donors dictate strategies for implementing these projects, which are completely out of tune with political realities and do more harm than good.”
Such reasoning underscores why British financial aid for India won’t be missed. But vast problems of inequitable distribution of wealth, endemic corruption, and excruciating poverty still remain major challenges. Many Indians believe that the onus is on India, not foreign donors, to empower its underprivileged millions. A strong opponent of foreign aid reliance, Ghosh claims “the internal political economy of India remains the biggest obstacle towards ensuring universal access to basic needs for the population. More progressive fiscal policies that raise taxes from the rich are obviously both necessary and possible, as are strategies that encourage more productive employment and economic diversification.”
Moving on from being an aid recipient, India is bolstering its credentials as a donor nation. Post 2008, the old rules of give and take have crumbled in light of new alignments in a new world. The Economist made a pointed observation about this, detailing how India proposes to disburse almost US$11 billion in aid over the next five years.
“India has pledged nearly US$2 billion in Afghanistan for various capacity and institution-building purposes,” explains Shanthie Mariet D’Souza, Research Fellow, Institute of South Asian Studies, National University of Singapore, Singapore. D’Souza adds that India’s aid pattern giving is unique because in addition to state building efforts, Indian NGOs such as Self-Employed Women’s Association (SEWA) are engaging with communities in Afghanistan (through women’s groups) to build capacity at a grassroots level too. This two-pronged approach, coupled with the historical and cultural ties between the countries, is making India’s aid more effective and popular in Afghanistan. “It’s in India’s interest to stabilise Afghanistan. With its emerging great power status, many countries in the neighbourhood are looking up to India to set a positive precedent for the rest,” adds D’Souza.
In a re-ordered world that still grapples with gaps in access to basic human needs, the need may be for impact investing rather than the old model of unilateral grants. Impact investment offers donor countries the opportunity to invest in developmental interventions, achieving social as well as financial objectives. Not only does it hold promise to spur social innovations in such countries, it offers a balanced solution to the long-standing debate of aid versus trade.
Olina Banerji is a Consultant with Ashoka India and graduated from LSE with an MSc in Media and Communications in 2010.
India’s trajectory from aid recipient to donor nation | India at LSE
India’s foreign aid program catches up with its global ambitions
Citing its newfound economic strength, India revealed plans to reorient its positioning in the aid community just over a decade ago.
“A stage has come in our development where we should now, firstly, review our dependence on external donors. Second, extend support to the national efforts of other developing countries,” said then-Indian Finance Minister Jaswant Singh in February 2003.
Since then, India’s ambition of transitioning from aid recipient to donor hasn’t panned out completely. Despite its increasingly dismissive posture toward Western aid donors, the Indian government still receives billions of dollars in foreign aid money each year. In 2011, India’s official development assistance to gross national income ratio stood at 0.2 percent, on a par with Egypt and Angola and up from 0.1 percent in 2003.
Yet even as India remains among the largest recipients of foreign aid, the country has come a long way toward bolstering its standing as an emerging donor. In its latest budget unveiled in February, the Indian government set aside nearly $1.3 billion for foreign assistance in 2013-14, a fourfold jump from 2003-04. Over the past four years, Indian foreign aid spending has grown annually by an average 32 percent.
“The intensity, volume and scope of [Indian] aid giving has remained immune from the government’s austerity drives which have reduced the spending power of various ministries,” Shanthie Mariet D’Souza, a research fellow with the Institute of South Asian Studies at the National University of Singapore, pointed out.
Some members of the parliament in New Delhi have been less confident of the Indian foreign aid program’s budgetary position. Just last month, a standing committee of India’s lower house of parliament warned that the Ministry of External Affairs’ budget was no longer commensurate with its foreign aid and diplomatic activities.
Technical cooperation continues to account for the bulk of Indian foreign assistance. In 2012-13, Indian spending on technical cooperation activities reached $589 million, representing 58 percent of the country’s foreign aid budget. The Indian government also makes sizeable contributions to multilateral organizations, including the U.N. Development Program and the World Health Organization. :india:
USAID-style aid agency delayed yet again
In 2007, Indian Finance Minister P. Chidambaram announced the government’s intention to establish a full-fledged Indian aid agency. But despite repeated pronouncements from New Delhi in the years since, the agency that would have been modeled after the U.S. Agency for International Development has yet to materialize.
New Delhi’s aid program is mostly under the purview of the Ministry of External Affairs, which taps specialists from within its ranks and across the Indian government to carry out its programming. India has also channeled its aid money through other ministries, however, including the Ministry of Finance and the Ministry of Defense. The proposed USAID-style aid agency would have consolidated the administration of Indian foreign aid activities under one roof.
In January 2012, the Indian government launched a coordinating and monitoring body for Indian foreign assistance within the Ministry of External Affairs called the Development Partnership Administration. Dweep Chanana, an expert on Indian foreign aid who is currently a director with UBS’ philanthropic division, told Devex the DPA could eventually evolve into a full-fledged aid agency.
Yet while the creation of the DPA is widely acknowledged as a positive step for the decentralized and fragmented Indian aid program, many observers caution the Indian foreign aid and diplomacy apparatus remains woefully understaffed.
Thus far, the Ministry of External Affairs has assigned only 20 staff members to the DPA. Moreover, the ministry’s overstretched diplomatic corps of 900 foreign service officers — roughly equal to that of Singapore — is raising valid questions over India’s ability to engage effectively with its development partners overseas. New Delhi is increasingly looking to its diplomatic missions to appraise funding requests from other governments.
“This is a general problem for India’s foreign service. There are not enough diplomats,” Chanana asserted.
Focus close to home
In line with its status as a regional power, India has been a leading aid donor to its smaller neighbors Bhutan and Nepal since the 1950s. The two countries have historically received the lion’s share of Indian foreign assistance.
India’s economic considerations for its aid program are on display in Bhutan, where its assistance focuses on developing the hydropower sector. The Indian government openly acknowledges that it intends to buy back much of the electricity generated through its hydropower assistance to the country. In 2012-13, Bhutan claimed 36 percent ($213 million) of India’s technical cooperation spending.
Meanwhile, small-scale development projects in Nepal’s health and education sectors have emerged as priority investments for Indian foreign aid. Nepal received 8 percent ($49 million) of India’s technical cooperation budget in 2012-13.
And in a development that has been strongly encouraged by the United States, Afghanistan has rapidly moved up the Indian aid agenda since the fall of the Taliban regime in 2001. Now the second-largest recipient of Indian foreign aid after Bhutan, Afghanistan garnered 15 percent ($89 million) of Indian technical cooperation spending in 2012-13. A new parliament building in Kabul, a hydroelectric dam in Herat province as well as community-level development initiatives are among the projects backed by the Indian government.
Polls suggest India’s aid program in Afghanistan has been generally well-received by Afghans — perhaps no surprise given the two countries’ long-standing cultural ties. As Afghanistan braces for reduced aid levels in light of the NATO drawdown, there are some signs demand for Indian development engagement is growing in the country.
“When I visited Jalalabad, the TV station manager wanted more of India’s assistance in training of local journalists … In Kandahar, women at an Indian medical facility wanted more medical help,” D’Souza said to Devex as she recounted her recent field visits to Afghanistan.
The Indian government emphasizes that its aid activities in Afghanistan and elsewhere are demand-driven, a claim which has been supported to some extent by Indian aid experts, including D’Souza.
Expanding to Africa
Yet even as much of India’s aid money remains close to home, India has also extended the reach of its assistance well beyond South Asia. In large part through its deputation of technical experts abroad, the Indian aid program now spans more than 60 countries in Asia, Africa and Latin America.
India has been particularly keen on expanding its aid engagement with Africa. In 2012-13, African countries received 7 percent ($43 million) of India’s technical cooperation budget, up from 4 percent in 2011-12. The emerging donor stresses its willingness to share lessons from its own development with Africa.
“India will work with Africa to realize its vast potential … We do not have all the answers but we have some experience in nation building which we are happy to share with our African brothers and sisters,” Indian Prime Minister Manmohan Singh told African heads of state attending the second India-Africa Forum Summit in Addis Ababa in 2011.
In Addis Ababa, Singh committed $700 million in assistance to establish educational institutions and training programs across Africa, including in Uganda, Ghana, Botswana and Burundi. The Indian prime minister also announced $5 billion in lines of credit — largely tied to the purchase of Indian goods and services — to African countries. The Indian government is expected to make further aid commitments for the continent at the third India-Africa Forum Summit in the summer of 2014.
The Indian aid program has already drawn upon its strengths in the ICT sector to create Africa’s largest tele-education and telemedicine initiative, the $125 million Pan-African e-Network. Kicked off in 2006, India’s flagship aid initiative in the continent now connects 47 African countries with leading schools and hospitals in India through satellite and fiber-optic links.
Devex.com
May 13, 2013
India’s foreign aid program catches up with its global ambitions | Asia
