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India tells UK to turn off the aid tap already

Reported yesterday in the English language daily newspaper the Indian Express*:

The External Affairs Ministry has instructed the Finance Ministry to inform London that India will not accept further aid from next April…

“…[I]t would be better if our decision not to avail any further DFID assistance with effect from 1st April 2011 could be conveyed to the British side in an appropriate manner at the earliest,” [Foreign Secretary Nirupama Rao] wrote to Finance Secretary Ashok Chawla.

Ahead of Cameron’s visit, India had considered rejecting DFID offer in view of the “negative publicity of Indian poverty promoted by DFID”.

Welcome to the paradox of aid to India. On the one hand, the World Bank still classifies India as a “lower middle income” country. With a per capita GNI hovering around $1000, it is home to one-third of the world’s poor, and 75 percent of its population lives on less that $2 per day.

On the other hand, India is the world’s 11th largest economy. It has a space program, a nuclear weapons program, and it is projected to grow by 9 percent this year and 8 percent the next.

Source: OECD DAC

At the same time that India is telegraphing its readiness to lessen its dependence on official aid, it is also positioning itself as a donor, using its aid money just as traditional donors do, to gain friends and influence among its neighbors. Though no one knows exactly how much aid India gives out (it does not have one central development agency, nor does it report aid statistics to the OECD) India recently offered a $1 billion loan package to Bangladesh and announced $25 million to aid Pakistan’s flooded areas.

Over the last decade, India has consistently been the largest recipient of the UK’s aid, receiving some $3.3 billion since 2001. But last month, we learned of a major change in Britain’s criteria to allocate aid, requiring that aid projects make “the maximum possible contribution to national security.” The UK development secretary has basically admitted that this means places of current military-strategic interest, like Afghanistan, are in, while holdovers from colonial- and Cold War eras, like India, are out.

Apparently, India got this memo as well and has decided to preempt UK cuts by announcing that India no longer needs the aid anyway, thank you very much.

*Thanks to reader Luke Seidl for the tip.

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13 Comments

  1. Rod wrote:

    In a few months they will both tell their friends the breakup was “mutual”.

    Posted September 16, 2010 at 12:13 am | Permalink
  2. Mike Tierney wrote:

    Laura is correct. We are not certain how much India gives in aid every year. Different agencies within the Indian government give foreign aid and account for it in different ways. There is some publicly available project-level data from the Indian government that is available on the AidData platform here…

    http://www.aiddata.org

    Just click “donor” then click Asia and you will see a list of Asian donors. Select India and you will see project level data from 2008-2010. Yes, that data is more recent that data you can get from OECD donors. And more is coming soon.

    Also, for a cool graphic that shows change in UK aid allocation over time, you can see this dynamic map embedded in a youtube video created by Stu Hamilton and one of my GIS savy students, Ben Arancibia. They made this using AidData data.

    http://www.youtube.com/watch?v=_35iGgGxofA

    As Laura’s post suggests, India is a large (and usually the largest) recipient of aid from the UK…

    Posted September 16, 2010 at 8:37 am | Permalink
  3. Rupa Dehejia wrote:

    Dear Professor Easterly,

    I really enjoy reading your blog. I thought I’d send you my WSJ piece on the paradox of India both giving and receiving aid that you might enjoy.

    Rupa

    http://blogs.wsj.com/indiarealtime/2010/09/08/why-does-india-give-and-receive-aid/?KEYWORDS=dehejia

    Posted September 16, 2010 at 9:54 am | Permalink
  4. Tapan Parikh wrote:

    Go India!

    Posted September 16, 2010 at 10:50 am | Permalink
  5. Yes, a few other signals that India might be emerging on the other side of the table. See this news item on the Global Funds efforts to get India to cough up some money at the GF’s replenishment meeting in October. see here:
    http://www.thehindu.com/news/national/article623684.ece
    Of course NACO just signed a MOU with the GF to receive a grant of 128 m for AIDS, TB and Malaria. See here:
    http://www.thehindu.com/news/national/article621604.ece
    Historically, though the UK news is significant. It is shaking off the final shackles of colonialism. But the question is, for better or for worse for the many poor who have a chance to survive because of aid supported programs and aren’t direct beneficiaries of India’s economic growth?

    Posted September 16, 2010 at 11:13 am | Permalink
  6. Curious wrote:

    I don’t think wealthy Indians really could care less about their lower classes.

    Posted September 16, 2010 at 12:20 pm | Permalink
  7. Adam Baker wrote:

    What is with the continuously varying data? Gratuitous spline?

    Posted September 16, 2010 at 12:53 pm | Permalink
  8. Dan Kyba wrote:

    @ Curious
    see http://www.sccommissioners.org/

    They do care in about the same ratio as one would see in any functional society or developing country – human beings being human beings being human beings.

    Posted September 16, 2010 at 6:17 pm | Permalink
  9. Laura Freschi wrote:

    Mike, I have been looking for that cartogram video for months, I had seen it but couldn’t remember where- thanks! It would be interesting to see one for the US as well.

    Thanks also for providing the AidData link to India’s project level data as a donor. Is there a reason that there are no figures listed under commitment amounts? Or that is in the works?

    Posted September 16, 2010 at 6:34 pm | Permalink
  10. Curious wrote:

    Dan – what I’m getting at is that it’s the elite Indians that complain about aid and are embarrassed to be recipients of it and are resentful of it…and thus have the power to reject it. I should like to see a multi-class opinion survey on the matter…and compare higher classes with the untouchable lot.

    Posted September 16, 2010 at 7:19 pm | Permalink
  11. Dan Kyba wrote:

    @ Curious

    I worked in India – the referenced link being my client.

    Corruption is a terrible thing in the way, when the organisations and institutions don’t hold up, otherwise honest individuals do corrupt acts as they take care of themselves and family and avoid being crushed. In such an environment, those who stand up to it are extremely courageous and worthy of our support.

    Your mention of a survey is a good idea since it brings a more nuanced approach to this debate since the aid industry is a continuum ranging from the very good to the very bad and the outright predatory. I would describe the ‘Indian elite’ in the same manner.

    By upper classes and elite, I presume you refer to caste, both the traditional version which was a fairly fluid system with movement from one category to the next, the later bureaucratised version with its rigid definitions and struggles for reserved placements and now a modernised version, sometimes called ‘designer tribalism’, favoured by some NGOs and who are also fighting for their reserved placements. Within each caste, even among the ‘untouchables’ or dalits there is an elite which is doing very well for itself. The most successful to date, politically and financially it appears, being Kumari Mayawati.

    Having said all this, I would adjust your phrase by saying ‘some’ elite Indians complain about ‘some’ aid and leave it to you to provide the detail.

    Posted September 16, 2010 at 10:26 pm | Permalink
  12. Tom wrote:

    completely agree with Curious. I have some wealthy Indians as students and what they say about the lower classes is unbelievable. They couldn’t care less.

    Posted September 20, 2010 at 7:45 am | Permalink
  13. Mike Tierney wrote:

    Hi Laura,

    Sorry for the delay. We had a minor software glitch. The data on commitments was in the back end, but it was not publishing. That problem is now fixed so you can do the India query and the commitment amounts will publish. In fact, all the amounts are in this new blog post by Jonathan Chan. Just look in the embeddable widget in this post…

    http://blog.aiddata.org/2010/09/india-turns-up-its-aid-tap.html

    As for a cartogram viedo of U.S. aid over time, I don’t have one made right now, but I do have a genius student, Ashley Ingram, who knows all things GIS. I can ask her to make one and send it to you.

    Posted September 22, 2010 at 2:10 pm | Permalink

3 Trackbacks

  1. [...] This post was mentioned on Twitter by William Easterly, Kerim Friedman 傅可恩, nubiancheetah, Lisa Genasci , Ronit B and others. Ronit B said: RT @bill_easterly India tells UK: "no more aid" http://bit.ly/9pwl7e [...]

  2. [...] comes the news that India has decided to decline further aid from the United Kingdom. Read the post here and as always, filter through the comments [...]

  3. By Interesting links | Sinocentric on September 21, 2010 at 1:58 am

    [...] doesn’t want aid from the UK [...]