India’s Transition to Global Donor: Limitations and Prospects (ARI)
India
Theme:
India has increasingly sought to expand its activities as a donor, both to reposition itself as an emerging power and to use aid as an instrument for engaging with other developing countries. This ARI looks at the current state of India’s donor programme as regards both its size and scope, identifies India’s role within the multilateral aid scenario and evaluates the challenges and prospects for further growth.
Abstract: India has expanded its aid programme over the past decade, emerging as a serious donor in certain countries. While the amounts remain small, India’s emergence has focused attention on its possible motives.
The term ‘emerging donor’ has, over the past decade, become an accepted part of the development world’s lexicon, providing further evidence of the rise of emerging economies. This does not mean that the donors themselves are new. What is new is an increased recognition globally that emerging donors are now a viable complement, and in some cases a substitute, to aid from traditional donors.
The emergence of these donors is particularly evident now because it occurs at a time when the developed world faces fundamental questions about its own socio-economic model.
The financial crisis has undermined confidence amongst OECD countries, put their aid commitments in doubt and given rise to questions about their social welfare and free market models. It is into this vacuum that India has willingly stepped in to offer its own philosophy of development and growth.
Disbursements by emerging donors were estimated at €8.5 billion in 2006.[1] While small (aid by OECD donors in 2006 totalled €103.9 billion),[2] the competition that these donors insert into what was once an oligopoly of high-income OECD nations has caused much consternation in development circles: China’s aid programme has prompted both awe and fear;[3] India’s stirs a mix of confusion and frustration abroad and pride and criticism at home.
India started its aid programme soon after independence, with the budget speech of 1958 referring to INR100 million in multi-year grants to Nepal and an INR200 million loan to Myanmar.[4] Since then, but particularly over the past decade, India’s aid programme has evolved substantially, growing both in scale and ambition.
This paper analyses the evolution of India’s giving in recent years. However, rather than simply describing what India gives and to whom, it primarily looks at three related questions: (1) what are the main characteristics that distinguish India’s aid?; (2) as India grows into a global donor, how is it likely to view multilateral engagement?; and (3) against the backdrop of almost certain growth in giving in the future, what are the challenges and options ahead?
Analysis
Defining India’s Giving
At the outset it is worth establishing what constitutes aid in the context of India’s donor programme. Like most emerging donors, India’s aid-related activities do not follow the traditional definition of the Development Assistance Committee (DAC). Rather, an alternative definition can be considered: spending that furthers India’s standing as a donor. There are three parts to that spending, namely grants and preferential bilateral loans to governments, contributions to international organisations (IOs) and financial institutions (IFIs), and subsidies for preferential bilateral loans provided through the Export Import (EXIM) Bank of India.
In 2010 India’s aid-related budget allocations were INR36.66 billion[6] (US$785 million in current dollars), a compound annual growth rate (CAGR) of 6.9% from 2004 to 2010. In addition, the EXIM bank in 2008 approved loans and guarantees worth INR352.47 billion with US$3.75 billion in operative lines of credit (see Table 2 and Graph 1).
These numbers, while big, cannot compare with the giving of China or any of the established donors (China is estimated to have donated US$616 million in 2007 to Africa alone).[7] Thus, India’s ability to use its aid well depend not on how much it gives, but rather on how it directs its aid and what else it offers.
Towards this end the country’s multilateral budget has increased rapidly. In 2008 and 2009 India spent INR30,719.4 and INR67,630 million respectively (US$2.1 billion) towards increasing its IMF share quota (IMF investment accounted for 66% of the entire budget in 2009). India has also been an enthusiastic donor to the World Food Programme (WFP).
Secondly, these deficiencies expose India to the entire risk of aid giving, in particular allegations of neo-colonialism (a criticism often directed at OECD donors) or of undermining human rights (a criticism directed at China). Any move to expand direct aid should thus be made with caution.
Conclusions: There is no doubt that recent changes to India’s aid programme mirror a more general re-think of India’s role in the world. Responding to increasing ambitions the programme has evolved to be more global, economic and bilateral. India has sought to engage more closely with the multilateral system, while creating its own niche within the development universe by remaining distinct from other donors.
China has often used aid to facilitate access to natural resources. India’s approach, by contrast, is described by Kragelund[15] as being ‘on a smaller scale, a bit tardier and not spurring the same dichotomous reactions’. It can be argued that this has prevented India’s giving from realising its full strategic potential. However, that smaller scale and tardiness have also prevented India from tripping up on its own good intentions in what is still an early period of its programme.
The risk is that as India increases its giving it may try to achieve too many things –political pre-eminence in its vicinity, economic links with East Africa and access to strategic resources (natural or military) in Burma or West Africa–. As that happens, India will expose itself to the same criticisms levelled against China and against traditional donors –a risk amplified by India’s institutional limitations that hinder transparency and accountability–. In short, India’s ambitions will continue to outstrip available resources and capabilities.
Those limited resources should therefore be used as much to gain direct leverage as to promote India’s private and non-profit sectors in the developing world. Collaboration with other donors can happen, so long as it promotes those general principles. What is needed is a more conscious, transparent and cohesive approach to develop this strategy, rather than the current opportunistic one, because these sectors have always been India’s strengths.
Dweep Chanana
Advisor to private and institutional philanthropists with a Swiss private bank
India
In the last week of April, India announced a us $5.4 billion credit to African countries for developing their infrastructure and meeting other development goals. This five year package also included duty free imports from 50 Least Developed Countries, of which 34 are in Africa. The government also announced a grant of us $500 million to African countries and doubled the number of fellowships given to students from African and Asian countries.
Largesse with agenda | India Environment Portal
you would think for a country that has more poverty than Africa would give first priority to increasing the living standards, but not the Indian regime. I can understand building a military for protection (even though they are spending way beyond what they would need), but I just cannot get my head around all the moon and mars missions. All to massage the ego.
