India aid diplomacy moves up a gear

Development Policy21 Feb 2013Mahesh Acharya
‘We don’t like to call ourselves a donor’

India has established it’s own department of development aid. A government’s spokesperson: ‘the assistance is driven by India’s genuine want for a stable neighbourhood’. A source: Every power wants its sphere of influence to remain intact and expand further and that’s more obvious when it comes to your own backyard.

India established the Development Partnership Administration (DPA) with an objective to streamline the delivery of New Delhi-aided development projects in developing countries, especially in its neighbourhood and Africa. India seems to have rolled up its sleeves to join the group of powers which use assistance to buy the influence for long-term strategic and economic interests, analysts say. Nevertheless, Indian Foreign Secretary Ranjan Mathai told a conference of Indian heads of missions this autumn, that the Ministry of External Affairs ( MEA ) this year will see a significant cut in their funds of around IRs 25 billion and that they will have to make do with that.

This prospective cut is one of few instances of fiscal disciplining and manifestations of recent efforts of ‘big ticket reforms’ undertaken by the Manmohan Singh-led government.But from neighbourhood to faraway lands, be it Africa, South America, Central Asia or the Caribbean, India’s assistance has shown no sign of decline even in these difficult times. Rather, it has increased considerably over the last few years.The total appropriation for external grant and loan in the 2012-13 budget stands at IRs 51.48 billion, which is an increase of 50 percent and 70 percent over 2011-12 and 2010-11.

Basically, DPA is what USAID is for the US and the DFID for the UK. Still, New Delhi, in an apparent bid to look different, does not want to present itself as a donor. The DPA is part of the Ministry of External Affairs (MEA).“We insist that what we mean by development partnership is not a donor-recipient relationship. We don’t like to call ourselves a donor,” MEA Spokesperson Syed Akbaruddin said.“We respond to the development priorities of our development partners without being intrusive in modality of projects and imposing conditions for our mutual benefits,” he added.

India’s External Affairs Minister Shri Salman Kurshid meeting with Vice President of Chile His Excellency Andres Chadwick

Larger chunk in neighbourhood

South Asia accounts for about 70 percent of India’s total commitments under grant assistance and 50 percent of the projects are in the region. As of now, 135 grant assistance projects spread over 61 countries.Apart from that, India provides Line of Credit (LoC) or loans at confessional rates. Another form of Indian assistance is via the Indian Technical and Economic Cooperation (ITEC) under which a variety of courses or training are provided to students from developing countries in Indian institutions. The biggest recipient in the neighbourhood has been Bhutan, which receives IRs 12 billion in grant and another 3 billion in loan in the current fiscal year 2012-13, up from 10 billion last year.New Delhi has also upped its grant assistance to Nepal to IRs 2.7 billion (2012-13), up from 1.5 billion (2011-12). Apart from this, New Delhi had formally signed a deal last year to provide Nepal an LoC of $250 million, following on the pledge it made during President Ram Baran Yadav’s India visit in 2010.

Bangladesh has become the top recipient of soft loan with New Delhi’s pledge of LoC amounting to $1 billion last year during Prime Minister Singh’s historic visit to Dhaka.The Maldives, Sri Lanka, Myanmar and even Afghanistan have seen a surge in grant from New Delhi over the past few years.

Why is India spilling so much money in the neighbourhood?

In former Indian ambassador Veena Sikri’s view, there is no ‘vested interest,’ rather. This notion is reflected in the oft-stated views of the PM, the External Affairs Minister and Foreign Secretary that lend primacy to the neighbourhood in the foreign policy.However, a source close to the government admits that it is obvious to expect one’s genuine interests addressed in other nations in exchange of the assistance it extends.“It is not a new phenomenon. Every power wants its sphere of influence to remain intact and expand further and that’s more obvious when it comes to your own backyard.”

The China factor

On the second week of July, National Security Advisor Shiv Shankar Menon called Indian envoys stationed in the neighbourhood to New Delhi to discuss ways of ‘countering China’s increasing economic and diplomatic leverage in South Asia,’ according to a report in a leading Indian daily.That discussion concluded on the need of urgency for fast-tracking the current bilateral projects through the DPA. Though this sense of competitiveness seems to exist between these two rising economies, in both formal statements and diplomatic practice, cooperation is the buzz word now.Despite irritants, China and India have taken the bilateral relationship to a new height, which could be corroborated by a number of facts. The quantum of bilateral trade has touched $75 billion, which is projected to reach $100 billion by 2015. Exchanges of highest levels of visits and cooperation in international forums on issues like climate change have been strong to signal burgeoning Sino-Indian ties.

Criticism from inside

Many take the establishment of the DPA as a sign of India formally shedding its mantle of an aid recipient country and moving on to the stature of a donor. But equally, a larger section believe that India has a lot of domestic problems it should focus on, rather than distributing money to foreign countries. India’s decision to provide $10 billion to the ailing Eurozone in July, despite its own frail economy, sparked a huge criticism from the local media and opinion makers.

India’s External Affairs Minister unveiling the portrait of Rabindranath Tagore at the ‘House of Poetry’ with the Egyptian Minister for Culture Dr Shakir Abdel Hameed in Cairo March 2012

This article appeared previously on and is published with the author’s approval.