India’s development grants more than double in 5 years

  • India’s development assistance has risen from $11 bn in 2013-14 to $28 bn in 2018-19
  • India extended 278 lines of credit totalling about $28 billion to 63 countries—most of them in Africa and Asia during 2018-19

India’s development partnership assistance, extended to countries through concessional loans, has more than doubled in the past five years as the world’s fastest-growing major economy attempts to sustain its influence in Asia, Africa and Latin America amid growing Chinese presence in these regions.

India extended 278 lines of credit totalling about $28 billion to 63 countries—most of them in Africa and Asia during 2018-19, according to data from the foreign ministry. This is a sharp increase from 195 lines of credit worth $11 billion in 2013-14. Lines of credit are loans extended to foreign governments at concessional rates from money borrowed at market rates by India’s EXIM Bank from the international market. Analysts said the lines of credit—one of the major components of India’s development partnership that includes grant assistance as well as scholarships—helps the country bolster its image as a credible development partner besides aiding the creation of political influence and constituencies. It also helps India shed the tag of being an aid recipient—something common in the 1950s and 1960s.

A key reason for the rise in India’s lines of credit is greater availability of resources at its disposal. The size of India’s economy is estimated at $2.69 trillion in 2019 (taking the rupee/dollar exchange rate as 70) with its GDP clocking more than 7% growth per annum.

“I would say that there is a conscious effort by India to increase its lines of credit portfolio in recent years because of the increased penetration of China in areas and regions seen as India’s traditional strongholds," said former foreign secretary Kanwal Sibal.

Added to this is the stated intention of the government to position India as a “leading power" and this requires such a “footprint," he said.

Some of the big-ticket projects completed by India in the past few years include the presidential office in Ghana, the National Assembly building in Gambia, a cricket stadium in Guyana and the Kosti Power plant in Sudan. India has also helped refurbish a steel plant in Hama in war-torn Syria, scaling up its annual capacity from 70,000 million tonnes to 300,000 million tonnes.

Officials acknowledge that the current projects may not propel India into the league of China—known for its signature infrastructure projects such as ports, roads, airports and bridges across Africa and other parts of the world. But the potential of Indian companies to execute such projects and deliver according to agreed timelines and internationally accepted quality standards is being recognized, one of the officials cited above said.

India scaling up its lines of credit comes as China embarks on its ambitious Belt and Road Initiative (BRI) —that involves building ports, airports, roads and railways across Asia, Africa and Europe. There have been warnings from countries such as the US in recent years that signing up for BRI may mean countries falling into a “debt trap" as the terms favour Chinese companies and inability of recipient nations to repay Chinese loans on time would undermine their sovereignty.

In contrast, “India’s lines of credit and other forms of development partnership are projected as unique. They are demand-driven; they respond to felt needs of people; and they do not impose unacceptable burdens such as debt traps or long-term dependency," said Rajeev Bhatia, a senior analyst at Mumbai-based Gateway House think tank.

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