Does India really need Britain’s aid?

There is a controversy in Britain over the government’s decision to continue giving 280 million pounds in aid to India each year. This charity has not persuaded the Indian Air Force to award its fighter aircraft contract to a British manufacturer. Further, it is argued in London, at a time when Britain itself is facing economic decline and is advocating austerity in public spending, whether it make sense to send so much money to an emerging economy that can surely look after itself.

Why does a country give aid to another? There are essentially two reasons. At the broader level, the winners of the international economic system hand out some of their earnings to the less well-off as part of a social contract, and to ensure disaffection does not boil over. This is the sort of enlightened self-interest that determines why a family in an upper-class neighbourhood contributes to the welfare of the nearby slum lest neglect and alienation someday breed extreme resentment.

This sentiment is not always expressed negatively. The international aid community is full of ‘do-gooders’ who genuinely believe in aid for aid’s sake and not merely as a contrivance for stability. Yet the wider philosophy remains the same.

The second reason is more transactional. Countries give aid to strategic allies, to tactical partners in exchange for, say, votes at the United Nations and similar bodies or route it in the form of goods and services produced by the donor economy.

For recipient countries like India — with expanding internal resources — external aid is only useful if the quantum is substantial or if some unique proposition is being delivered. In the case of British aid, 280 million pounds amounts to just over Rs 2,000 crore a year. Five years ago, estimates by the Comptroller and Auditor General of India concluded that the annual anti-poverty spending by central government ministries alone amounted to Rs51,000 crore. The outlay has only grown since then, and state government spending can be added to it. As such, British aid is a drop in the ocean.

There was a time when India happily took bilateral assistance from anyone who offered it. Over time, as domestic capacities strengthened, this image as an all-purpose beggar was recognised as an embarrassing anachronism. There was also a practical problem. Individual donors had different reporting formats, regulations to meet and forms to fill. The bureaucratic cost of administering a relatively small amount of aid from a specific country was just not worth it for New Delhi.

In 2003, the NDA government cut the Gordian knot and said it would take bilateral aid from only six donors — Britain, the US, Russia, Germany, Japan and the EU. The UPA government, which came the following year, initially criticised this policy and reinstated several other donors — as part of its “aam admi” narrative to project India as poorer than it was. Eventually, the UPA too saw merit in its predecessor’s restrictive action.

As such, what finance minister Pranab Mukherjee means when he terms British aid ‘a peanut in our total development’ programme, and what Jaswant Singh did as finance minister in 2003 when he shortened the list of bilateral donors to India are not substantively different.

For donor countries, the continuance of aid well beyond any reasonable sell-by date and without pragmatic calculations of its political benefits is probably the result of sheer inertia. Japan is one of India’s largest aid partners, but its imperatives and support have remained the same even as India has moved from poor to middle-income status and even as India’s global stature — and ability to win an election to, for instance, the Security Council — has challenged if not surpassed Japan’s.

Some of the Japanese aid helps develop Indian infrastructure and (indirectly) facilitates Japanese companies that have invested in India. Some of it is clearly overdone, and the result of nobody in Tokyo reversing a legacy initiative and taking a cold-blooded cost-benefit call.

In Britain’s case, the inertia is of another order. The British Department for International Development is almost a special-interest group within Whitehall. With its impressive budgets, job opportunities, patronage networks and local associate organisations in India, it has a vested interest in persisting with and perpetuating the idea that British aid is absolutely critical to India’s development, if not its survival. Those in Britain who wonder if India deserves aid should not stop at pointing a finger at New Delhi. They would be better served turning a gaze at DFID.

— The writer is a New Delhi-based columnist