The Future of DFID's Programme in India - International Development Committee Contents

1  Introduction

India: wealth and poverty

1. India is a land of contrasts. It currently has the world's fourth largest economy, based on purchasing power and continues to expand rapidly.[1] Gross Domestic Product (GDP) is predicted to increase by 8.5 % in 2010-11.[2] As One World Action notes 'economic growth has been remarkable—the past 25 years has seen one of the greatest spurts of GDP per capita in modern history.'[3] Nevertheless India's per capita income is 1/20th that of the UK.[4]

2. Economic growth has had an effect on poverty. Per capita income is currently $1,170, placing India just inside the Middle Income Country category of the World Bank.[5] The percentage of people in the country living below the $1.25 per day international poverty line has declined from 60% in 1981 to 42% in 2005.[6] Health has improved: for example, under-five mortality rates have fallen from 74 per 1000 in 2005-06 to 62.6 in 2010.[7] Maternal mortality rates are estimated at 230 per 100,000 births in 2008, down from 570 in 1990.[8]

3. Nevertheless India will not meet the Millennium Development Goals in these areas by 2015. Many Indians remain very poor. India has one third of all the people in the world living below the international poverty line, more than all of sub-Saharan Africa.[9] The Oxford University and United Nations Development Programme (UNDP) new Multi-dimensional Poverty Index—which uses ten indicators covering three aspects of poverty (education, health and living standard)—to show household poverty reveals that 55% of the population, approximately 643 million people, suffer multiple deprivations.[10] Poor nutrition and sanitation are widespread. Lawrence Haddad, Director of the Institute for Development Studies, has described India as an 'Economic powerhouse and nutritional weakling'.[11]
Box one: selected indicators of poverty in India[12]
  • 456 million people live on less than $1.25 per day
  • 42% of India's population is classed as living in poverty
  • 850 million people live on less than $2 per day
  • 28% of children are born with a low birth weight
  • 1.83 million children under-five die every year
  • India accounts for one-fifth of all child deaths globally
  • India accounts for one-fifth of maternal deaths globally
  • 638 million people practiced open defecation in 2008

4. Women, children, and socially excluded groups suffer disproportionately. Despite the decline in rate of under-five deaths, 1.83 million children under-five die annually in India.[13] A World Bank Report estimates that approximately 60 million children are underweight in India.[14] According to the National Campaign on Dalit Human Rights (NCDHR)[15]:

    In spite of high economic growth rate the poverty rate among excluded communities in India has increased, coupled with the insecurity of livelihoods.[16] Various government reports admit the increasing inequality and vulnerability of about 30% of the population in India. Of great concern is also the persistent child malnutrition and maternal mortality rates which point to deeper concerns in the marginalised population.

5. The poorest people are mainly concentrated in the large, populous northern Indian states.[17] According to Lawrence Haddad, the poorest Indian states are 'the size of medium countries with populations in the 50-60 million range and if ranked as countries, they would have some of the highest poverty numbers in the world'.[18] Annual income per person in Bihar is $321, which is little more than a quarter of the national average of $1170.[19] Fifty five per cent of children under three in Bihar are underweight, more than 85% are anaemic, over a million children suffer from severe malnutrition, 60 million people have no access to toilets, and two in every three women are illiterate.[20]

6. Save the Children notes that according to current predictions India is off track on most of its Millennium Development Goal (MDG) commitments and points out that, because of its large population, 'If India fails to meet the MDGs so does the world'.[21] The mid-term appraisal of the MDG targets for India showed slow progress in poverty reduction, food security, access to education and health care, climate change mitigation and adaptation and infrastructure.[22] Based on progress from 1992-93 to 2005-06 the MDG1 target (to eradicate extreme poverty and hunger) will be attained in 2043 rather than 2015.[23] The UK Department for International Development (DFID) informed us that current progress in maternal health suggests that the MDG target of 145 per 100,000 live births by 2015 will not be met.[24]

Government of India poverty reduction programmes

7. The Government of India recognises these problems and is undertaking a wide range of measures and spending very large sums of money to reduce poverty through a series of national poverty reduction programmes.[25] DFID writes that:

    The Government of India has created a number of 'centrally sponsored schemes' to finance development (DFID has focused on those supporting improvements in education, health, HIV/AIDS and urban management). These often innovative poverty schemes are directly supporting the three out of four Indians who earn less than £500 a year.

    The Government of India's spend through these schemes has grown. For example, spending on primary education, as percentage of GDP, increased from 1.6% in 2006 to 3.7% in 2009. Absolute spending on health has increased from £4.5 billion in 2003-04 to £8.7 billion in 2007-08 (and in DFID focus states has increased three to four fold in the last ten years).[26]

Measures recently enacted by the Government of India include the National Rural Employment Guarantee Act 2007, 'which is the biggest work scheme in the world and ensures a welfare safety net so that every rural family has a right to 100 days of work each year paid at 100 rupees per day,'[27] and the Right to Free and Compulsory Education Act 2009, which for the first time in India's history mandated the Government to ensure that all children aged 6-14 can access schooling.[28] Although these schemes entitle poor people to certain benefits, not all those who are entitled actually access services. For example, of the 579 million people who registered for the national rural employment guarantee, only 218 million actually accessed the benefits.[29]

8. In the budget of February 2011 the Indian Government announced a 17% increase in social spending, on projects ranging from malnutrition to healthcare. "The country has carried for long enough the burden of hunger and malnutrition," Finance Minister Pranab Mukherjee said. The budget statement also announced that:

    The Government plans to spend 267.6 billion rupees (US$5.9 billion) on the health sector alone in the next fiscal year, a rise of 20 percent, while education spending would also rise, to 520 billion rupees.[30]

    A national food security Bill, which will provide a legal guarantee of subsidised food for low-income families, would also be introduced in the current parliamentary session.[31]

DFID's aid programme

9. DFID assists the Government of India in this work and is providing India with £825 million for the period 2008-11 making it DFID's largest bilateral programme. But it should be noted that donor assistance is small in relation to India's economy. Total Official Development Assistance (ODA) from all sources to India accounts for about 0.3% of India's GNP and the UK's direct contribution is a tiny proportion of this (0.03% of India's GDP at PPP rates).[32] This means that UK aid can only help and add value to the Government of India's efforts to reduce poverty and achieve the Millennium Development Goals. DFID writes:

    HMG's development strategy has been to support the Government of India's priorities ensuring that growth is inclusive to reach the poor. Given that our financial contribution has been relatively small in the Indian context, our aim has been to catalyse and add value to the much larger efforts of the Indian Government (at both national and state levels), multilateral organisations, private sector and civil society - by provision of resources to meet critical gaps and promote innovation, and by provision of technical expertise.[33]

10. DFID works at the national level and in focus states with high levels of poverty.[34] The bulk of UK aid to India is spent on health and education. The share of DFID's total India aid framework going to health increased to an estimated 48% in 2009-10 (up from 27% in 2005-06). Almost 20% (£57 million) of the total aid framework in 2009-10 was spent on education programmes. Urban and rural development are also areas of spending. For example DFID is supporting urban development programmes with the State Governments in West Bengal (£102 million for 2004-11), Madhya Pradesh (£41 million for 2006-12) and Bihar (£60 million for 2009-15). DFID is also providing technical support (£14.5 million) to the national Ministry of Housing and Urban Poverty Alleviation for its national urban poverty programmes.[35] DFID's programme, including detail of its spending is outlined in more detail in the DFID submission.


11. Whether the UK should continue to provide aid to India has been a source of heated debate in both the UK and India.[36] The Prime Minister's high profile visit to India in July 2010 provided a focus for this debate. UK criticisms have tended to emphasise India's wealth (only the United States, China and Russia have more billionaires), the Government of India's spending on its own aid programme to other countries and projects such as its space programme; in addition, allegations of persistent corruption have led to claims that spending is wasted. These criticisms are often linked to cuts in the budgets of other Government Departments. We list below some of these. At the time of the Prime Minister's visit, an article in the Daily Mail argued:

    But what is equally tricky—indeed, difficult—is for Cameron to justify why India needs to be given roughly £250 million every year as third world aid. India has a sophisticated space programme, extensive nuclear power and defence projects. It is spending colossal amounts of money on luxuries like Google Earth and other satellite navigation systems. So it would be reasonable to ask why Britain—and indeed, other developed countries—need to feel obliged to give anything in the way of financial aid.

    To understand why India hasn't solved its problems relating to various aspects of poverty you only have to look at how aid is distributed.[...]Money that trickles down to the poor is misappropriated by everyone from government officers to village 'officials' and in the end the corrupt, local politicians will appease the poor with just a few rupees. Violence is rife when it comes to politics, law and justice and the poor don't stand a chance.[37]

12. Moreover, while many of those who know its work have praised DFID, some have been critical. Richard Whittell, an independent researcher, interviewed more than 200 people affected by a range of DFID-supported projects and programmes in India between 2008 and 2010. He commented:

    it soon became clear that there was a significant number of people whose experiences of British aid contrasted sharply with the DFID's publicity and reports. Serious questions were raised regarding the DFID's attitude and accountability to those people it claimed to be supporting and the detrimental effects of its policies and projects on people's public services, their lands and natural resources and their national and state governance. [38]

Malini Mehra, Chief Executive of the Centre for Social Markets, argued in favour of giving less aid to governments and more to innovative civil society organisations saying:

    DFID began with [...]budget support at the national level and then it realised that that is not the best value for your investments. Now it is seeking to do that in some of the worst-governed parts of the country. Orissa and Bihar are making transitions to better government models but still there is pervasive malgovernment in these states. If you continue that model [...]of pushing your money through the states that are bureaucratic or have no interest in innovation or entrepreneurship, it will be wasted.[39]

On the other hand, many witnesses were supportive of DFID's decision to continue its aid programme in India. For example Christian Aid said:

    Keeping in view the magnitude and deeper social and structural dimensions of poverty in India, DFID has a strong role to play in working alongside the Government of India and civil society to tackle poverty. Christian Aid sees a very strong argument for continued, targeted UK aid to India, focused on the poorest states and communities, and for robust UK Government engagement with India's Government about the inequalities that cause and characterise poverty there.[40]

Save the Children commented on the importance of continuing UK aid in India because of the large number of poor people saying:

    With such high rates of poverty, there is a strong case for the UK to continue an aid programme, at least in the medium term, that supports the achievement of the Millennium Development Goals. Without this aid, children's lives will be at risk, and fragile gains in health, education and other areas will be more difficult to sustain. Aid is not a stand alone strategy, but it does play an important complementary role alongside other UK efforts, for example to boost trade links.[41]

Our inquiry

13. The International Development Committee reported on DFID's programme in India in 2005.[42] In view of the controversial nature of DFID's assistance to India, in October 2010 we decided to undertake another inquiry in this Parliament, indicating we would examine the aid programme, its contribution to poverty reduction and DFID's role in the wider relationship between the UK and India. We had originally intended to go to India at the beginning of 2011 and to complete our inquiry shortly thereafter, but postponed the visit until March at the request of the Government of India.

14. In June 2010 DFID announced a review of all its bilateral programmes. It expressed its intention to focus on fewer countries and to ensure that aid was targeted where it could do most good. In July, during Mr Cameron's visit to India, he and Prime Minister Manmohan Singh held discussions during which the Prime Minister of India indicated 'very strong support for our development work.'[43] In February 2011 the Secretary of State for International Development, the Rt Hon Andrew Mitchell MP, indicated that UK aid to India would continue (although frozen at current levels), but with significant changes.[44] On 28 March, the Secretary of State gave evidence to the Committee and told us of the proposed changes to the programme. The main changes were to make greater use of the private sector to provide aid and to focus more on the poorest states, moving funding away from national programmes. He told us:

    We are changing the nature of the programme in order to zero in on three of the poorest states. Some of our programme will zero in on the eight poorest states, but, by and large, around two thirds or 67% will in future be focused on those three of the poorest states. We think that that is the right balance, bearing in mind that the programme is also increasingly reflecting the importance of pro-poor private sector investment. Over the period of four years, we hope that around half of it will be spent. [45]

He added that the plans were still being discussed with the Government of India and that he was keen to take the views of this Committee into account:

    Not all of the final details are nailed down yet, particularly on how we will do the private sector work. We are still in discussions about that. The fact that we are going to focus in the poorest areas going forward was, however, something I discussed with the Indian Government when I was there last November.[46] [....]We are delaying the publication of our operational plan on India until we have a chance to see and take into account the views of the Committee.[47]

15. In addition to taking evidence from the Secretary of State the Committee held three other evidence sessions with academics, researchers and non-governmental organisations. We also received written submissions from a number of organisations and individuals. Our visit to India took place from 8 to 17 March. We visited Delhi, Bihar and Madhya Pradesh. In Delhi we had meetings with a wide range of senior political figures, officials, NGOs, private sector organisations and multilaterals. In Bihar and Madhya Pradesh we met senior figures in the state Governments, officials, technical experts paid for by DFID and many others, including most importantly, many recipients of DFID aid. The World Bank receives large sums from the UK taxpayer, so we looked at one of their projects as well as examining many DFID-supported projects. We would like to thank all those who have helped us in our inquiry.

16. In this report we look at whether the Government was right to continue the UK aid programme to India up until 2015, then in chapter three at policy planning for the 2011-15 programme and our assessment of the Government proposals for this period. The UK Government has stressed that the UK and India should have an enhanced partnership, covering many matters of mutual interest. We consider a number of those which are relevant for development and reducing poverty, namely climate change, trade and education in chapter four. In his evidence to us the Secretary of State for International Development spoke of walking the 'final mile' with India. Our final chapter is concerned with what should happen after 2015.

1   By purchasing power parity, on the same basis, the UK has the sixth largest economy. As of 1 January 2009 (Central Intelligence Agency, World Factbook). Back

2   Ev 86 [DFID] Back

3   Ev w13 [One World Action] Back

4   Ev 87 [DFID] Back

5   UNICEF 2009, quoting the World Bank Back

6   The World Bank: India Back

7   V K Paul et al, Reproductive health, and child health, and nutrition in India: meeting the challenge, The Lancet, Vol 377 January 22, 2011 Back

8   Ev 89 [DFID], quoting WHO 2008 Back

9   Ev 87 [DFID] Back

10   Ev w1 [Christian Aid] Back

11   Ev 114 Back

12   Ev 88-9 [DFID]; UNICEF statisitics; Ev 81 [Robert Chambers] Back

13   Ev 74  Back

14   According to Health, Nutrition, and Population Family (HNP) of the World Bank's Human Development Network, August 2005. The Lancet figurefor underweight under-fives is 43% Back

15   Ev w12 Back

16   Excluded communities are explicitly recognized by the Constitution of India, which refers to "Scheduled Tribes" ((STs) specific indigenous peoples) and Scheduled Castes ("SC"s, also known as untouchable," "exterior caste," "depressed class,") (these groups were previously called the "depressed classes" by the British. SCs/STs together comprise over 24% of India's population, with SC at over 16% and ST over 7.50%.). SCs/STs are commonly referred to as dalits.But for Dalits meaning of this word is qualitatively different. The Dalit Panther Movement, defined this word in itsr 1972 manifesto as: "A member of Scheduled Castes and Tribes, neo-Buddhist, the working-people, the land-less and poor peasants, women, and all those who are being exploited politically, economically, and in the name of religion." Back

17   Ev 87 [DFID]. There are 28 states in the Indian Federal System. Back

18   Ev 113 Back

19   Information supplied by DFID.  Back

20 Back

21   Ev 120 Back

22   Ev w37 [VSO] Back

23   Ev 118 [Lawrence Haddad] Back

24   Ev 89 Back

25   Available at: Back

26   Ev 87. This figure refers to expenditure by all state Governments and the central Government.  Back

27   Ev 121 [Save the Children] Back

28   Ibid. Back

29   DFID, Briefing, May 2011 Back

30   The total spending on public health, family welfare and education is proposed to increase over 30% from £7.4 billion in 2009-10 to £9.7 billion in 2011-12. The proposed plan outlay on health and education was 17% higher for 2011-12 compared to 2010-11. The figure for spending in the health sector refers to expenditure by the central government only for the financial year 2011-12.  Back

31 Back

32   Ev 91 [DFID] Back

33   Ev 87 Back

34   Ibid. Back

35   Ev 94-5 Back

36   For some Indian views see Back

37 Back

38   Ev w41 Back

39   Q137 Back

40   Ev w2 Back

41   Ev 122 Back

42   International Development Committee, Third report of Session 2004-05, DFID's bilateral programme of assistance to India, HC 124. Back

43   Q120 Back

44 Back

45   Q117 Back

46   Q118 Back

47   Q115 Back

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Prepared 14 June 2011