In 2012, the United Kingdom disbursed $180 million in foreign aid to India which was until recently the U.K. Department for International Development’s second largest bilateral program. Toward the end of last year, however, U.K. Secretary of State for International Development Justine Greening announced that the United Kingdom would be ending all grant-based assistance to India by 2015, citing the country’s rapid growth and development progress.
The U.K. government decision came just months after New Delhi appeared to dismiss the U.K. aid program in India.
“We do not require the aid. It is a peanut in our total development spending,” then-finance minister and current president of India, Pranab Mukherjee, declared in February 2012.
In a bid to achieve more focus in its programming, in 2011 DfID named 27 priority countries as part of its reform drive across the agency. With aid budgets stretched, the United Kingdom and other donors have been under increasing pressure to concentrate their assistance on lower-income countries, opening up valid questions over how donors should treat aggressively emerging and influential economies that still struggle with poverty and are susceptible to the middle income trap.
Considering the long history between the United Kingdom and India, it would be reasonable to expect other donors to follow the Cameron administration’s lead and concurrently scale down foreign aid to India. To the contrary, however, most international donors remain steadfast in their commitment to the world’s fourth largest economy which is also home to more than one-third of the world’s poorest people. Indeed, even with aid budgets under pressure, European donors such as Germany and France have actually continued to increase their assistance to India.
Overall, despite India’s growing ability to finance its development spending as well as its own emergence as an aid donor, the country remains one of the leading recipients of foreign aid. According to the Organization for Economic Cooperation and Development’s Development Assistance Committee, India was the sixth largest recipient of official development assistance in 2011 – the latest year for which official statistics are available.
So what is India’s foreign assistance recap for 2012 and outlook into 2013? Devex provides some answers and perspective.
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On his first visit to India as World Bank president, on March 13, Jim Yong Kim reaffirmed the multilateral lender’s long-standing partnership with New Delhi. Disbursing $1.1 billion in lending to the South Asian country in 2012, the World Bank is India’s largest donor. India also ranks among the largest recipients of World Bank assistance.
“We believe that India is a good investment. We need to make that clear to everyone else, and we’re going to deepen our engagement as much as we possibly can, using every bit of flexibility and creativity to get there,” said Kim.
At the request of the Indian government, the World Bank has announced plans to increase its support to seven low-income Indian states. The bank’s programming in these states will focus on expanding access to education, health care and other basic services.
During a speech in Washington, D.C. on April 2, Kim also revealed that a new World Bank Country Partnership Strategy for India would be sent to the multilateral lender’s board for review this month. Through 2016, the bank expects to provide between $3 billion and $5 billion in assistance to India each year. The World Bank’s 2009-2012 country assistance strategy for India had named infrastructure, skills development and agriculture as its lending priorities in the country.
While hosting his Indian counterpart Salman Khurshid in Tokyo last month, Japanese Foreign Minister Fumio Kishida unveiled a total of 291 billion Japanese yen ($3 billion) in loans for infrastructure projects in India. Approximately 71 billion yen has been set aside for the Indian capital’s subway system, the Delhi Metro. During their meeting, Khurshid and Kishida also agreed to pursue cooperation on a future high-speed railway project in India, Kyodo News reported.
In 2012, Japan disbursed $747 million in assistance to India, maintaining its position as the South Asian country’s largest bilateral donor. That year, the Japan International Cooperation Agency committed to financing six infrastructure projects in India, including the construction of transmission lines and substations in the state of Tamil Nadu. In November 2012, the Japan International Cooperation Agency pledged to speed up its loan process for the Kochi Metro in Kerala state.
In the wake of the March 2011 earthquake and tsunami that battered Japan, some Indian officials had expressed concern that JICA could postpone financing of its projects in the country. Within weeks, however, JICA made clear that it had no plans to reassess or reduce its programming in India.
Back in 2009, Germany’s then-newly appointed federal minister for economic cooperation and development Dirk Niebel hinted that Berlin could wind down two of its largest bilateral aid programs, China and India.
“Battling poverty is more important than ever for Germany. That means we should place our resources where they can help the most. Economic giants like China and India no longer fulfill these criteria,” Niebel told the Bild.
Surprising to many, however, the German government has actually increased its bilateral assistance to India in recent years. In 2012, Germany committed 565.8 million euros ($736.2 million) in financial and technical assistance to India, up from 517.7 million euros in 2011. According to the OECD-DAC’s recently released survey of donors’ future spending plans, this trend is likely to continue at least until next year. Germany did end its bilateral development cooperation with China in 2010.
Energy, environment, and sustainable economic development are priorities for the German aid program in India. The government of the Indian state of Odisha is currently soliciting proposals for a German government-funded initiative to support urban infrastructure development.
Asian Development Bank
“In line with our traditional strength in infrastructure development, we remain committed to strengthening India’s energy, transportation, and urban infrastructure–sectors that are critical for a vibrant investment climate,” said Kuroda.
Energy, transportation, and urban infrastructure account for 80 percent of ADB’s $9 billion sovereign loan portfolio in India. ADB’s 2012-2014 country operations business plan for India had called for investments in these three sectors, as well as agriculture, natural resources management, finance and education.
During 2012, ADB disbursed $726 million in lending to India, including $74.8 million to improve and upgrade roads in India’s northeastern states. Next month, Delhi will host ADB’s 46th annual meeting.
Despite its decision to end all grant-based assistance to India by 2015, DfID has pledged to continue providing technical assistance to the South Asian country–albeit with a budget about one-tenth of 2012 levels. The British and Indian governments have agreed to develop a joint technical assistance program focused on priority issues such as growth, investment, education, skills and health. DfID has also announced plans to invest in private sector initiatives in India, financed with returnable capital.
Through 2015, DfID will only fund ongoing grant-based projects. The bulk of these projects focus on the following sectors: wealth creation, governance and security, education, health, as well as poverty and hunger.
Coming on the heels of then-French President Nicolas Sarkozy’s state visit to India in 2008, the French Development Agency, or AFD, and the Indian Ministry of Finance signed an agreement paving the way for AFD to begin its engagement in the South Asian country. The September 2008 agreement committed AFD to focus its programming on the following areas: energy efficiency, renewable energy development and urban transport; biodiversity conservation; and the fight against communicable and emerging diseases.
In the years since, France has rapidly become one of India’s largest aid donors. In 2012, France committed $160 million in assistance to India, including $67 million for infrastructure and livelihood support in Assam state.
Last month, AFD signed a 110 million euro financing agreement with the Bangalore Metro Rail Corp. for the first phase of Bangalore’s rapid transit system. Back in 2010, French official development assistance to India stood at only $3 million.
Global Fund to Fight AIDS, Tuberculosis and Malaria
In 2012, the Global Fund to Fight AIDS, Tuberculosis and Malaria disbursed $118 million in grants to help finance India’s response to the “Big 3” communicable diseases. Since 2003, the Global Fund has approved $738 million in funding for HIV/AIDS in India, as well as $270 million for tuberculosis and $92 million for malaria.
Following its restructuring and reform process, the Global Fund revealed last year that India was one of 20 high-impact countries that would become the focus of the multilateral financing facility’s investments. At the same time, the Global Fund has consistently urged the Indian government to scale up its HIV/AIDS financing and programming. As of 2009, an estimated 2.4 million people were living with HIV in India.
Among its peer donors in India, the U.S. Agency for International Development stands out for its emphasis on robust engagement with India as a strategic partner in global development, rather than an aid recipient. USAID programming in India has been increasingly focused on catalyzing innovative interventions that could have a significant development impact in the South Asian country and beyond.
“In India in particular, we focused on an effort to turn our traditional program there into an innovation laboratory that can help address the effort to end extreme poverty inside of India, but also bring Indian resources and talent and entrepreneurship to Africa, Burma, Afghanistan, Bangladesh, and a number of other settings,” said USAID Administrator Rajiv Shah in remarks upon returning from a visit to Mumbai last month.
Shah added that USAID has identified health, agriculture and energy as priority sectors for its funding of innovative development interventions in India. He has also indicated that the Obama administration will continue to allocate roughly $100 million in foreign assistance to India each year.
In November 2010, U.S. President Barack Obama and Indian Prime Minister Manmohan Singh launched the Partnership for an Evergreen Revolution, which aims to leverage U.S. and Indian agricultural expertise towards global food security efforts. The initiative has financed the studies of 200 agricultural fellows from Africa at Indian universities. USAID is currently soliciting proposals for its $6 million India-Africa Agriculture Innovation Bridge Program. The program will share Indian agricultural innovations in the U.S. Feed the Future initiative focus countries of Kenya, Liberia, and Malawi.
Against the backdrop of extreme budget pressures in the EU, the European Commission has championed a proposal called aid differentiation that would effectively discontinue its bilateral assistance to 19 middle-income countries including India as early as next year. Backed by EU Development Commissioner Andris Piebalgs and some members of the European Parliament, the proposal has yet to be adopted in Brussels.
Whether or not the aid differentiation proposal moves forward in the coming months, the recent EU budget deal is likely to result in sizeable cuts to EU aid to India. February’s budget agreement among European leaders would slash spending for the EU development cooperation instrument by 16 percent from the EC’s proposed levels for 2014-2020. DCI is the EU’s primary financing instrument for its India aid program.
For 2011-2013, the EU had committed a total of 210 million euros in assistance to India. The EU set aside 100-130 million euros of that amount for education assistance, as well as 50 million euros for health assistance.
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