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T N Ninan: India as 'aid' giver

India now ranks among the bigger aid donors in the world, when ranked as a percentage of GDP and also in terms of the total money on offer

T N Ninan  |  New Delhi 

Would you believe me if I said that India now ranks among the bigger aid donors in the world, when ranked as a percentage of GDP and also in terms of the total money on offer? The government does not call it aid, of course; the preferred phrasing is development partnership assistance. By whatever name you want to call it, consider the numbers. The prime minister has promised $1.87 billion annually to Africa over the next five years. Another $0.5 billion is on offer to countries in other continents. These are in the form of soft loans, with interest rates going down to as low as 1.75 per cent for poor countries, with extended repayment periods. Separately, there is about $0.7 billion that is directly funded through the ministry of external affairs as development partnership spending, plus bits and pieces of money allocated under other budgetary heads.

The total spending is hard to assess because the numbers are not collated in any one government document. Piecing the different numbers together, the sums on offer would seem to total up to $3.5 billion annually, or just under 0.2 per cent of GDP — though it is important to add that all the money does not get spent in time because of capacity absorption issues in receiving countries. Still, current spending compares with about $9 billion given out over the past decade; so it is clear that the purse has been opened wider in recent years.

As another reference point, the United Nations target for official development assistance (ODA) was 0.7 per cent of the GDP of wealthy countries, a goal set in the 1970s. That number was never reached, except by a handful of countries — mostly in Scandinavia. But here’s the thing: the money that India puts out for development spending in other countries, as a share of its GDP, is now in the same ballpark range as much wealthier countries, with the Millennium Project putting the United States, Australia and Portugal (for instance) in the range of 0.20 to 0.25 per cent. And since India’s GDP is the 10th largest, the total quantum of development partnership money is more too.

The money given out continues to be less than what is coming in (about 0.3 per cent of GDP), and India therefore continues to be a net aid recipient, although the smaller donor countries have been told that their money is no longer required. Still, should a poor country, with some of the worst socio-economic indicators in the world, be spending so much money in other countries? After all, India has just given money to fund the war effort in Mali, and has offered the International Monetary Fund several billion for the European bailout programme.

The justification would be that this is part of a diplomatic outreach effort that signals India’s desire to play a larger role in world affairs. Also, such spending is desperately needed when China is spending much more in virtually every corner of the world, on a scale that India cannot match. The objective, it would seem, is not to match China in quantity, but to do so in the quality of spending, and to get greater bang for the buck in terms of goodwill — in countries as vital to Indian interests as Afghanistan and Myanmar, Nepal and countries further afield. Indian technical experts seem to do well in other countries, India’s training programmes are highly valued, and the south-south context helps in terms of acceptability. In short, there is more going on out there than most people suspect.

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First Published: Sat, February 02 2013. 00:55 IST