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Business News/ Politics / News/  India goes from aid beneficiary to donor

India goes from aid beneficiary to donor

India goes from aid beneficiary to donor


After having survived on international aid for decades, India has upgraded its profile to join the ranks of donors and is increasingly extending economic and development assistance to countries in South Asia, Africa, Central Asia, Latin America and the Caribbean.

And though the Indian government is careful to convey that all such projects are based on considerations of mutual benefit and are not exploitative in nature, people close to the development and analysts agree that the process dovetails with India’s long-term strategic and economic objectives.

“Till a decade ago, both the size and spread of such projects was very limited but now its scope and reach have widened considerably. The DPA is an effort to put together under one umbrella all aspects of project implementation, from conception to formulation, to monitoring implementation and impact assessment," this person said.

Former foreign secretary Lalit Mansingh said the move will address a major complaint against Indian development programmes—that they were not effective enough as such projects took a long while to get completed. “While India’s manpower training programmes were seen as effective, our building programmes were seen as overshooting timelines and project costs," Mansingh said.

Ahmed Raza Khan/Mint

India’s record of helping neighbours like Nepal and Bhutan is not new, said Mansingh, noting that such efforts go back to the 1950s and 1960s—when India was getting aid from the World Bank constituted Aid-to-India Consortium. Formed in 1958, it consisted of the World Bank and 13 countries including Britain, Canada, France, Italy, Japan and the US. In the early decades after India’s independence, the aid was used to develop industry and agriculture.

“India was short of foreign exchange...and capital at the time and we needed the assistance," Mansingh said.

But a reversal in the trend began after India launched its market reforms in the 1990s and foreign investment began to flow in, he said. In the early 2000s, there was an assessment of India’s needs for external assistance and it was decided by the then foreign minister Jaswant Singh to cut the number of countries providing such help to India, Mansingh said. At present, India’s main donors include Germany and Japan besides multilateral lending institutions, according to the latest Economic Survey.

Now India disburses grant assistance, lines of credit and undertakes manpower training programmes under the Indian Technical and Economic Cooperation (ITEC) programme.

ITEC involves imparting training to students from partner countries to boost human resource development and thereby build institutions, said Biswajit Dhar, director general of the Research and Information Systems for Developing Countries thinktank in New Delhi. The foreign ministry website says the programme involves upgrading skills of civilian and defence personnel in India.

Of the other two, grant assistance helps fund a large number of projects—mostly in India’s neighbourhood, said another person familiar with the developments. This involves India undertaking infrastructure projects. Examples of major projects India is funding under the grant assistance include the construction of 50,000 houses in northern and eastern Sri Lanka for Tamils displaced by the three-decade old civil war that ended in May 2009, and that of a 220kV transmission line from the northern Afghan city of Pul-e-Khumri to Kabul, this person said.

“South Asia accounts for about 70% of our total commitments under grant assistance. If you take the geographical spread, we have a total of 135 grant assistance projects over 61 countries," the second person said.

Under lines of credit—the third element of India’s development partnership programme—the government offers loans on concessional terms to countries, the first person cited above said. “These are spread again all over the world but many more of them are in Africa than in our neighbourhood."

Whatever the form of assistance, India is careful to point out that it is responding to the needs of those seeking assistance and not foisting its own formulae on assistance seekers, said the first person. “We don’t lay down the development priorities. And we tailor our projects according to that. We do not impose conditionalities. We are also very careful to be non-intrusive in the matter of how the projects are selected and implemented. And lastly, our projects are based on considerations of mutual benefit," this person said.

India is also keen that its development assistance programmes are different from the traditional “donor-recipient relationship" and hence the stress on “development partnership".

Analysts agreed that the model India has chosen to follow is different from the “North-South economic cooperation patterns" that India itself was subject to in the past.

“Donors’ club like the OECD (Organization for Economic Cooperation and Development) have attached conditionalities to the assistance they offer. Some countries are known to use aid to further their commercial interests," said Dhar. “Countries like India have been opposing these conditions. While the OECD countries have been talking of the effectiveness of the aid, India, for example, has stressed on development effectiveness. India has also laid stress on using local resources and local expertise like in Afghanistan... India can try and help redefine the rules governing rendering assistance."

Development assistance does have its spin-offs—“promotion of Indian exports and our access to natural resources. Many of them serve our energy security requirements," said the second person quoted above.

“Strategic and economic goals go hand in hand," said Dhar, agreeing that development projects like schools and hospitals go a long way in bolstering goodwill vis–à–vis India in the recipient country. In the case of Afghanistan, India has been engaged in reconstruction activities with the stated intent of shoring up goodwill among common Afghans.

“The fact that the DPA division is located in the ministry of external affairs shows it is in sync with our foreign policy objectives of transforming India into a global player" with a corresponding economic punch, said Mansingh. It was not without reason that India’s development assistance programmes were concentrated in countries or regions that would give India resources and energy—like Africa and Central Asia, for instance, where China seems to have an advantage—to boost its economic growth and protect its strategic interests, he said.

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Published: 01 Jul 2012, 11:44 PM IST
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