Building BRICS of Foreign Aid: India Gives and Receives

A country with the distinction of having been the largest foreign aid recipient in history would seem an unlikely candidate as a powerful contributor in the world of foreign aid today.  Not so for India.

Between 1951 and 1992, India received an estimated $55 billion in foreign aid and has since emerged as a global economic powerhouse.  Since then, the country launched its own space program, and in 2011 it even contributed $10 billion to the IMF European bailout fund!   The foreign aid story has now come full circle: with the creation of an Indian state foreign aid agency, the Development Partnership Administration, India plans to distribute $15 billion over the next five years.

In contrast to the traditional Western philosophy of aid, where wealthier countries bestow aid upon poorer countries, India sees foreign aid as “mutually beneficial partnerships”  in the spirit of South-South cooperation.   This perspective on aid seems to be shared by India’s fellow BRIC countries.

Today, India is the world’s fifth-largest donor to Afghanistan, the largest to Bhutan, and a substantial provider of aid to African countries.

Afghanistan is one of the largest recipients of Indian aid, with some $2 billion committed since 2001, of which $1 billion has already been distributed.  Indian aid is focused on developing Afghanistan’s infrastructure, education, and providing technical assistance. India has a long history of development assistance with its neighbor Bhutan, of which the

Indian investment helped create Bhutanese Hydropower Facilities

centerpiece is Indian investment into hydropower in Bhutan, with the surplus power exported to India.

Recently, India has focused development assistance to African countries, at the 2011 India-Africa Forum Summit, India pledged $5 billion in aid to Africa in the form of concessional loan.  Apart from development aid, India will spend $700 million to build institutions and establish training programs and $300 million to develop the Ethiopian-Djibouti Railway. In the offering are plans for an India-Africa virtual university and more than 22,000 higher education scholarships for African students.  Furthermore, trade ties between India and Africa stand at $46 billion a year, which the Delhi delegation expressing a desire to take to $70 billion by 2015 and India-Africa bilateral investments reached $90 billion in 2010.   Additionally,  an India-Africa Business Council has been announced, as well as other smaller programs such as government-supported cultural exchanges.  This contrasts with China’s aid and investment in the continent as India’s strategy is focused more on government-to-government ties rather than Chinese corporate ties.

In many ways, India’s transformation from net recipient to net donor can be considered an accomplishment for foreign aid. A great example of this successful transition is India’s response to polio; as an earlier CGP Blog Post discussed:  In 2012, India successfully eradicated polio, only three years after reporting the highest caseload of any country in the world.  India is looking to share the experience it has accumulated combating the disease, with other countries.  Over the last three years, India has spent $100 million on health projects overseas, largely focused on building up local medical systems and transferring expertise.

The push to shed the label of “recipient county” came to a head in April of 2011, when Indian politicians told the U.K. that India no longer requires or desires British development aid.  However in part due to political factors, India was ultimately persuaded to continue receiving some $450 million annually from the U.K.

When considering India’s new status as a donor country two key questions arise: Should India be assisting developing countries when 29.8% of its population lives below the poverty line as of 2010, around 370 million people?  On the other hand, should India continue to receive development assistance now that it has such a robust economy?  While it is encouraging to see India offering assistance to other countries, this outward engagement must occur in tandem with its domestic development.


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