India's aid gradually shifting beyond Asia, extending to new regions

Development cooperation has been a vital component of India’s engagement with partner countries. As part of its commitment to the Global South, the government has undertaken several developmental projects.

 

These efforts are primarily carried out through Lines of Credit (LoC), the Concessional Finance Scheme (CFS), grants-in-aid, and heritage conservation projects. These projects span a wide range of sectors like water, power, railways, roads, agriculture, education and health care.

 

Of the 24 projects undertaken through LoC since 2019, nine have been completed as of 2024. Under CFS, only one project, implemented in Bangladesh, has been completed.

 

Meanwhile, under grants-in-aid, 19 out of 28 projects have been completed, even as all 5 heritage projects are still under implementation over the period.

 

In absolute terms, India’s highest disbursement of external aid and LoC in the last 11 years, amounting to $7.19 billion, was recorded in 2016-17. By comparison, the disbursement declined to $1.74 billion during 2023-24 (Chart 1). 

 

High financial assistance during the early years over this period can largely be attributed to the National Democratic Alliance (NDA) government getting as legacy significant infrastructure projects, such as Salma Dam in Afghanistan, which were nearing completion and required pre-determined funding.

 

India has started gaining recognition as an aid donor since FY14. Its global presence has expanded since, with a growing footprint in Africa. However, FY24 saw a decline in the share of aid directed towards African countries (Chart 2).     

 

While India’s presence has steadily grown across other continents and regions, China continues to maintain a deeper penetration globally, given the size of its economy (Chart 3).     

 

As overseas aid remains a key diplomatic instrument, India directed a significant portion in FY24 towards five South Asian countries: Bhutan, Bangladesh, Nepal, the Maldives, and Myanmar. Bhutan was the recipient of the largest aid with a major focus on funding hydropower projects (Chart 4). 

 

Conflict-affected nations like Sri Lanka, Bangladesh and Afghanistan have seen a decline in their share of Indian grants and aid over the years. For Bangladesh, the share dropped from 8.7 per cent of total in FY14 to 4.4 per cent in FY24; for Sri Lanka from 7.5 per cent to 3.3 per cent; and for Afghanistan from 9.8 per cen to zero during the same period (Chart 5).     

 

While South Asian countries remain the top recipients of Indian aid, their overall share has declined, as India has extended aid to new regions and countries. However, the share of Mauritius and Seychelles, which had emerged as important recipients of this assistance, declined in FY24 (Chart 6).